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.”

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