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RealTime IT News

Supreme Court Gives Verizon Its Blessing

The U.S. Supreme Court handed Verizon Communications an early Christmas present Monday, giving the incumbent local exchange carrier (ILEC) the go-ahead to appeal its reciprocal compensation case against WorldCom with the federal courts.

The ruling overturns the views held by the Maryland Public Service Commission (PSC) and the Fourth U.S. District Court, that issues between telephone companies in reciprocal compensation matters could only be held at the local and state levels.

Bob Bishop, a Verizon spokesperson, said the victory is merely a procedural one, with the main battle yet to come.

"All this ruling does is decide that disputes between telephone companies can be argued in federal courts and the case can now move out of the Fourth District, where it's been sitting since the call for a ruling was made," he said. "No one knows when it will go forward; I'd like to say 'in the near future,' but it'll likely take longer than that."

Verizon is looking to avoid paying as much as $28 million in reciprocal compensation fees to WorldCom. Reciprocal compensation agreements between carriers are formalized "gentleman's agreements" mandated by the Telecom Act of 1996, in which one carrier pays another for the termination of a phone call.

Incumbent telephone companies have been fighting reciprocal compensation almost since passage of the Act, even though it was a plan first conceived of and forwarded by the Baby Bells.

Soon after the bill was passed, however, competitive LECs (CLECs) quickly realized signing up Internet service providers (ISPs) put money in its pockets, because calls from ISPs normally terminated at the ILEC side of the network, giving CLECs the lion's share of the profits. Indeed, many CLECs tailored their business models on signing up ISPs as customers and using reciprocal compensation as another revenue source.

Last April the FCC, under considerable pressure from Bell lobbyists, effectively put a halt to the practice by instituting a three-year phase-out program.

In the 8-0 decision Monday, Supreme Court Justice Antonin Scalia said "we have no doubt that federal courts have jurisdiction."