Court Strikes Down Rules Favoring AT&T; Competitors

The Supreme Court on Friday struck down federal regulations that give long-distance phone companies competing with AT&T; more freedom to set rates and arrange special deals with customers.

By a 5-3 vote, the court ruled against a Federal Communications Commission policy that allowed MCI and other long-distance companies--but not American Telephone & Telegraph Co.--to offer rates and services not specified in filings with the commission.

The policy was designed to foster more competition for AT&T;, which holds a 60% share of the nation’s long-distance market. The policy has been in place for more than 10 years and is credited by some with fostering greater competition and innovation in interstate telecommunications.

AT&T; had successfully challenged the policy in the U.S. Circuit Court of Appeals for the District of Columbia.

Justice Antonin Scalia said the court has “considerable sympathy” for arguments by smaller long-distance companies that the costs of filing tariffs with the FCC can be prohibitive and that filing tariff rates can stifle price competition.

The commission does have some limited authority to change filing requirements or even waive them, Scalia said.

“But what we have here goes well beyond that,” he added. “It is effectively the introduction of a whole new regime of regulation . . . which may well be a better regime but is not the one that Congress established.”

Justice John Paul Stevens wrote in dissent that Friday’s decision adopts a “rigid literalism that deprives the FCC of the flexibility Congress meant it to have.”