SBC Slapped With $6M Fine

The FCC was held to a statutory maximum fine of $1.2 million per state for the five states. The fine doesn't change the fact that the Commission is on the verge of changing the rules it just enforced.

by ISP-Planet Staff [October 11, 2002]

Federal regulators fined SBC Communications, Inc. $6 million Wednesday for violating the terms of its 1999 merger with Ameritech, a Regional Bell Operating Company (RBOC) operating in the Midwest.

The Federal Communications Commission said an investigation prompted by competitor complaints found that San Antonio-based SBC attempted to restrict the ability of carriers in five states to share its network.

Many local phone companies that lack their own networks and equipment rely on the RBOC facilities to be able to offer competing services. The 1996 Telecommunications Act made it possible for new local carriers to lease lines from RBOCs companies, including SBC and Ameritech, so they could provide service options for customers.

FCC Chairman Michael Powell condemned SBC's violations of local competition rules.

"Such unlawful, anti-competitive behavior is unacceptable," he said. "Instead of sharing, as the law requires, SBC withheld and litigated, forcing competitors to expend valuable time and resources."

James Smith, SBC senior vice president, said in a statement that the company believes the FCC is in error.

"We believe that the Commission has mistakenly interpreted not only the letter, but also the intent of the shared transport merger condition," Smith said.

Smith added that SBC is reviewing the FCC's action and is considering what to do next. The company contested the fine when the FCC proposed it in January.

The FCC approved the merger between SBC and Ameritech in October 1999 after adopting 30 conditions to ensure the deal would serve the public interest.

The FCC had required SBC to give competitors providing local telephone service in five states access to its network for local toll calls on certain favorable terms. The five states include Wisconsin, Illinois, Indiana, Ohio and Michigan.

John Winston, of the FCC Enforcement Bureau, said that the $6 million fine is the most that the FCC is allowed to exact by law. The FCC was held to a statutory maximum of $1.2 million per state for the five states.

ISP and CLEC associations were quick to complain that the fine would not improve the situation. Sue Ashdown, executive director of the American ISP Association, said that the fine isn't a win for independent operators.

"At the same time SBC is being fined for breaking the law, the FCC is moving to erase the regulations that made the fine possible in the first place," Ashdown said.

H. Russell Frisby, Jr., Competitive Telecommunications Association (CompTel) president, put it another way.

"The fine represents less than a month of the CEO's salary," Frisby said. "SBC's actions cost consumers well over $6 million and allowed the company to retain more than $6 million of business. The problem is that the FCC doesn't have sufficient authority to levy a fine that will be meaningful."

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