The Federal Communications Commission ordered local phone carrier Ameritech on Tuesday to temporarily stop marketing long-distance service while it examines whether Ameritech is violating the Telecommunications Act of 1996.
The injunction could become a big legal setback for the local telephone companies and scrappy outfits like Qwest Communications International, which are trying to break into the US$100 billion long-distance market dominated by AT&T, MCI, and Sprint.
In May, Chicago-based Ameritech (AIT) began offering long-distance through a marketing agreement with Qwest (QWST), a specialty long-distance carrier best known for its fiber-optic telecommunication network. AT&T (T) and other long-distance providers sued, arguing Ameritech was violating telecommunication law by offering long-distance through this kind of arrangement.
Tuesday's FCC ruling prohibits Ameritech from enrolling new customers for long distance during the next 90 days. During that time, the FCC will determine the legality of the Qwest-Ameritech marketing agreement. The order does not require Ameritech to discontinue service to customers already enrolled.
"This is an unfortunate decision that penalizes consumers who simply want a better deal than they have with anyone else today," said Diane Primo, Ameritech's product management president.
Qwest also arranged a similar marketing agreement with regional carrier US West (USW). AT&T and the long-distance carriers filed a separate lawsuit against US West to have that agreement blocked as well. A federal court in Washington issued a temporary injunction against US West, prohibiting it from signing up new subscribers into its long-distance program.
Qwest said late Tuesday it was "unfortunate" that federal regulators were focusing on AT&T and MCI's complaint instead of focusing on consumers' interests.
"It is to AT&T's advantage to stifle competition in long distance and keep prices artificially high at the expense of residential and small business customers," said Joseph Nacchio, Qwest chief executive.
AT&T also cited consumer interest, calling the FCC move a "very positive step."
"Rather than forming alliances with selected long-distance carriers, Bell companies should be opening their markets and allowing customers to choose their long-distance company," AT&T said in a statement.
