Telecom stocks swung at midday after the government declined to appeal a court's rejection of the Federal Communications Commission's last effort to codify how phone companies make their networks available to competitors.

"The Office of the Solicitor General has informed the commission that it has decided not to appeal the D.C. Circuit decision vacating the commission's local telephone unbundling rules," the FCC said in a statement.

An appeals court struck down the rules in March after a three-year effort by Michael Powell's FCC to reach a compromise on the issue. The commission recently urged the parties -- regional Bells like

SBC

(SBC)

,

BellSouth

(BLS)

and

Verizon

(VZ) - Get Report

on one side, erstwhile long-distance specialists

AT&T

(T) - Get Report

and

MCI

(MCIA.PK)

on the other -- to head back to the negotiating table.

The regional Bells were each up about 2.5% just after the ruling, while AT&T dropped 57 cents, or 3.4%, to $16.38. The latter vowed to pursue legal redress of the appellate decision on its own.

"Failure to appeal this case could do lasting damage to the entire competitive telecom industry -- and will lead inevitably to higher prices and fewer choices for Americans," the company said.

The 1996 Telecom Act required the opening of regional Bell networks to competing phone companies in return for the right to offer long-distance service. Three efforts to write rules for such access have been struck down by courts.