CHICAGO -- AT&T and MCI today joined the Association for Local Telecommunications Services (ALTS) and Voices for Choices in filing a lawsuit in United States District Court against SBC and the Illinois Commerce Commission (ICC) over the passage last week of Illinois Senate Bill 885. The parties contend that SBC's new wholesale rates that were filed late Monday with the Illinois Commerce Commission (ICC) do not comply with the Telecommunications Act of 1996 and FCC regulations.

"SBC's special interest legislation is an affront to Illinois residential and small business customers and to local competition," said Mike Tye, regional vice president of Law and Government Affairs for AT&T. "It is clearly contrary to the federal Telecommunications Act of 1996 and completely reverses the course of Illinois' previous pro-competitive telecommunications laws and policies to the detriment of consumers."

"If the new wholesale prices that SBC has filed pursuant to the new law are allowed to go into effect, residential customers of competitive carriers will immediately see higher prices, and, within a relatively short period of time, SBC will have succeeded in driving local competitors from the market," Tye added. "The end result will be a remonopolization of the Illinois local exchange market and ultimately the entire market for residential telecommunications services, leading to the same poor service, high prices and excessive monopoly profits to which Illinois residential customers have been subjected in the past."

The lawsuit seeks a determination that the recent revisions to the Illinois telecommunications law contained in SB 885 are preempted by the Telecom Act. The complaint demonstrates that the new legislation usurps the role Congress gave the ICC, thereby violating the procedures that the Telecom Act and FCC regulations establish for resolving rate issues.

The complaint states that the new legislation is further preempted because the new rules imposed by SB 885 on fill factors, depreciation and use of SBC's cost models are substantially unlawful under the FCC's TELRIC (Total Element Long Run Incremental Costs) regulations.

In addition, the new legislation is preempted because the provision that freezes the rates for the first 35,000 voice grade equivalent lines for two years and immediately doubles rates for all other loops constitutes discrimination that violates Section 251(c)(3) of the federal Telecom Act.

In conjunction with the lawsuit, the plaintiffs also filed a motion for preliminary injunction requesting the Court to enter a temporary restraining order or preliminary injunction enjoining the defendants from implementing the new legislation on June 9th.

"If enforcement of the new legislation is not enjoined by the Court, AT&T will be forced to cease taking new residential local service customers and will have to raise rates to existing residential customers to levels that preclude it from competing with SBC," said Tye.

The bill had widespread opposition from AARP Illinois, Citizen Action/Illinois, Citizens Utility Board (CUB), Coalition for Consumer Rights, Consumer Federation of America, Illinois Lt. Governor Pat Quinn, Illinois Attorney General Lisa Madigan and Cook County State's Attorney Dick Divine.

In essence, the legislation that SBC strong-armed through the Illinois General Assembly and the Governor's office has the effect of allowing SBC to double certain wholesale prices that it charges competitors who use its network to provide retail services, while exempting SBC from the effects of these purported "cost increases" on its own retail rates. As such, this bill results in wholesale prices that are actually higher than the prices that SBC charges its own retail customers.

The ICC's endorsement this week of SBC's application to provide long-distance service in Illinois on the heels of the passage of SB 885 and its nearly doubling of wholesale rates will deal a terrible blow to competition in both the local and long-distance markets and reestablish SBC as a monopoly provider of telecommunications services. This is bad news for the people of Illinois, who are just beginning to realize the benefits of local competition.