Judge puts brakes on SBC rate increases

CHICAGO -- A federal judge on Monday blocked SBC Illinois from charging rival telephone companies millions of dollars in rate increases it pushed through the state legislature in May following a monumental lobbying duel.

U.S. District Judge Charles P. Kocoras acted hours after the Illinois Commerce Commission put its stamp on the increases in what SBC charges competitors for use of its lines, which AT&T and other companies said would force them to slap surcharges on their customers.

Kocoras said in his 22-page opinion that SBC should have gone to the Commerce Commission -- the panel that ordinarily sets phone rates in Illinois -- instead of going to the Legislature to get the rate increases.

Kocoras, a former ICC chairman, issued a preliminary injunction barring the new rates. He said that SBC's "direct appeal to the Illinois Legislature for rate relief is expressly contrary to federal law."

The ruling came as a setback for SBC Communications Inc., the big, Texas-based company whose president is William Daley, brother of Chicago's mayor. SBC is the nation's second largest local phone service provider.

'Very disappointed'

Carrie Hightman, president of SBC Illinois, the onetime Illinois Bell Telephone Co. now owned by SBC, said the company was "very disappointed."

She stopped short of saying just what step SBC attorneys might take next but added that the issue was anything but dead.

"In the coming weeks, in various forums, we will debate this issue with the hope that the legislative policy will be upheld," Hightman said.

It was a victory for AT&T, MCI and other local telephone service competitors of SBC who were joined by consumer advocates in denouncing the SBC bill as special interest legislation that violated federal law.

"This would have nearly doubled SBC's wholesale rates here in Illinois," AT&T public relations director Michael F. Pruyn said. "This represents good news for Illinois consumers."

The bill passed the legislature May 9 and was signed into law within hours by Gov. Rod Blagojevich following furious lobbying by both sides.

Highlighting the political tension over the bill, Lt. Gov. Pat Quinn issued a statement Monday night applauding the "resounding defeat for SBC and their efforts to improperly raise the price of local phone service."

SBC handed out a statement from Ronald E. Kastner, president-business manager of International Brotherhood of Electrical Workers Local 21, in which Kastner said state lawmakers "showed real leadership" in approving the bill. He said the bill would help protect the jobs of Illinois telephone workers.

As the purchaser of the Illinois Bell Telephone Co., SBC owns the lines and related equipment that deliver phone service to local customers.

Federal law, however, requires it to share its lines with companies that compete with SBC in providing local telephone service.

These companies are currently paying about $13.40 per customer per month. SBC's original plan would have raised that to $23.04 as estimated by AT&T or $21.40 as estimated by SBC.

A Commerce Commission official last week found an item marked "joint and common costs" within the tariff, or proposed rate increase, that SBC filed with the commission. The ICC held that item had not been approved under a part of the SBC legislation.

SBC then refiled its proposed rate increase at an estimated $19.16.

Monday morning, the commission approved that increase.

SBC says it has been allowing competing companies to have the use of its lines for bargain rates and in effect has been subsidizing them.

It says it should be able to charge them more.

A coalition of SBC's competitors sued to block implementation of the newly approved rates. They said going to the Legislature instead of the ICC violated the Federal Communications Act.

Kocoras said that if the Illinois Commerce Commission should rule against SBC its "appeal must be to the federal District Court and not to the legislators of the state in which it may hold sway."

"The ICC and this court are perfectly capable of determining whether SBC has been forced to subsidize its competitors in some unlawful way, such that its competitive abilities have been compromised," Kocoras said.

He said the commission is best equipped to evaluate the fairness of the rates SBC charges its competitors.

He said the SBC rates outlined in legislation "are an intrusion into federal law and are clearly inconsistent with it."

"As such, they cannot stand and must be enjoined," he said.