SBC Communications Inc., which owns Southwestern Bell and Pacific Bell, has withdrawn from a key portion of a lawsuit that continues to threaten the eRate. SBC’s withdrawal follows on the heels of a similar withdrawal by BellSouth Corp. of Atlanta and leaves GTE Communications Corp. as the sole complainant in the case.

The lawsuit challenges the FCC’s formula for setting payments that local phone companies get from long-distance companies to support the agency’s universal service programs, including the eRate. In November, the companies argued before the 5th U.S. Circuit Court of Appeals in New Orleans that the FCC’s formula gives too little money to companies with large numbers of rural customers, who cost more to service on a per-line basis.

In a separate filing, the companies had argued that the eRate represented an “unconstitutional tax” on telecommunications carriers, and that the FCC had exceeded its authority when it ruled that eRate discounts should cover internet access and internal connections as well as telecommunications services.

On Dec. 21, 1998 SBC filed a motion to withdraw its appeal of those aspects of the case dealing with the eRate. The court approved SBC’s motion Jan. 11.

Based on the FCC’s responses to congressional inquiries into the eRate last year, “We’re satisfied that we can work out our differences on the eRate with the FCC outside the courtroom,” said David Schlosser, press officer for SBC. “SBC’s commitment to education is such that we don’t feel the need work out these differences in court.”

Schlosser said one of the key issues for the plaintiffs was that the FCC seemed to be focusing too much of its time and energy on the eRate, instead of worrying about what the Telecommunications Act of 1996 said it should be focusing on: implementing the traditional high-cost, low-income aspect of universal service.

“Unfortunately, I think the eRate became caught up in the larger issues of universal service,” Schlosser said. “Now I hope we can focus on the most critical aspects of the appeal, the [high-cost, low-income] issues.”

BellSouth had withdrawn its appeal Nov. 24, stating that it believes “that most major issues…will be resolved through the regulatory process in place today. The company also believes that…it is in the best interest of BellSouth and its customers in the education sector to withdraw this appeal.”

Carol Henderson, executive director of the American Library Association’s Washington office, said she was encouraged to see another litigant withdrawing its challenge of the eRate in court. “We look forward to developing a positive working relationship with SBC and hope that all other legal and political challenges can be resolved,” she said.

Phyllis Albritton, eRate consultant to the Colorado Department of Education and the Colorado State Library, said she also was encouraged by the news. “It’s interesting to see that SBC has dropped the eRate portions of its complaint, because SBC sort of started the whole process of taking the matter to court,” Albritton said.

But others were more cautious in their assessment of the suit. Jon Bernstein, a lobbyist for the National Education Association, told eRate Update, “We are very happy that SBC has finally recognized the value of the program, but its withdrawal by no means signals the end of the threat.”

Remaining complainant GTE has given no indication that it will withdraw its appeal as well, Bernstein said. A spokesman for GTE declined to comment on the suit.

A three-judge panel is expected to issue its ruling sometime this spring.