Court Ruling Boosts Bells

The big local phone companies surged in late trading after a judge struck down a costly line-sharing rule.

The federal appeals court's move means the Bells may not have to share their networks with rivals at cut-rate prices.

Tuesday's decision, by the U.S. Court of Appeals for the District of Columbia, overturned a ruling this summer by the Federal Communications Commission. The FCC move came on the heels of its latest review of local phone competition and forced discount policies.

That ruling elaborated on a February decision that, among other things, preserved mandatory discounts for the Bells' local-phone rivals and shifted pricing jurisdiction back to the states.

The FCC's 3-2 vote was seen as a blow to the Bells like Verizon ( VZ), SBC ( SBC) and BellSouth ( BLS), which were forced to rent access to their networks at steeply discounted prices. But the court rejected that view Tuesday.

"This means the next stop will be the Supreme Court, where they will likely say that pricing decisions should be determined by the ruling body, the FCC," says Forrester telecom analyst Lisa Pierce.

Tuesday's ruling sent shares of the Bells surging. Verizon jumped 66 cents, or 2%, to $39.36. SBC rose 77 cents, or 3%, to $25.02 and BellSouth was up 85 cents, or 3%, to $28.53 in late-afternoon trading.

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