The Federal Communications Commission's latest attempt to overhaul rules governing competition for telephone and internet services was supposed to herald a new era of clarity in the turbulent telecommunications industry. Instead, analysts say, the FCC's Feb. 20 decisions reveal discord within the agency itself and spell even more uncertainty for schools and other consumers.

The nation's four regional Bell companies—BellSouth Corp., SBC Communications, Verizon Communications, and Qwest Communications—complained that the FCC failed to drop outdated rules that let competitors use local Bell networks at discounted prices. Consumer groups praised the decision because it preserves the ability of long-distance carriers such as AT&T Corp. and WorldCom Inc. to offer local telephone service.

But consumer groups also complained that the Bells won dangerous power over the future of broadband internet access, closing out smaller providers and guaranteeing higher prices and fewer choices for residential users.

For now, all that is certain is that the future of communications in America will be played out, once again, in the courts. Congress could step in, but many observers say that appears unlikely anytime soon with so many other issues dominating Washington these days.

"The surprise is not so much that we did not achieve what we hoped to on so many issues," said Thomas Tauke, top lobbyist at Verizon Communications, the nation's largest phone company. "The surprise is the disarray within the FCC and the resulting lack of a coherent legal and policy philosophy."

Competition for local phone service

The FCC was faced with an extraordinarily complex task: to reconsider, by a court-ordered deadline, its enforcement of the 1996 Telecommunications Act. Two earlier sets of rules had been rejected by federal judges.

One major ruling Feb. 20 was that state regulators will decide where, and at what price, Bells must make parts of their networks available to rivals to ensure local telephone competition. In its 3-2 decision, the FCC rejected arguments from the Bells that existing federal competition rules should be eliminated altogether.

Behind the commission's divided ruling is a requirement that the Bells lease parts of their local networks to competitors such as AT&T and WorldCom at discount rates. The policy was adopted seven years ago to encourage companies to compete in the Bells' markets while giving the Bells the chance to offer long-distance service in their regions.

Consumers could benefit from the decision to shift authority to states because local regulators tend to focus more than the FCC on keeping phone bills low, said Kathie Hackler, an analyst with Gartner Dataquest.

"States have more of a capability to deal directly with consumer issues," she said.

The Bells say the leasing rules allow competitors to use their networks at artificially low prices.