The Supreme Court listened to arguments today on a dispute over rates regulations stemming from a 1996 federal law that opened up competition in the local phone service industry. Phil Ponce discusses the case with Chicago Tribune reporter, Jan Crawford Greenburg.

PHIL PONCE: Today the Supreme Court heard arguments on a case that could affect every person in this country who has a phone and here to explain the case and describe what happened at the court is NewsHour regular Jan Crawford Greenburg, National Legal Affairs Reporter for the Chicago Tribune. Jan, the case we're talking about is called Iowa Utilities Board Vs. the Federal Communications Commission. Why is it such a big case, and what's the potential impact?

JAN CRAWFORD GREENBURG, Chicago Tribune: Well, this is big stakes litigation. As one of the long distance companies involved told the court, this will affect, like he said, every home or business with a telephone; it is of profound national importance and is critical to the national economy. For the companies involved it could determine how the $110 billion local telephone market is divvied up and how soon that's going to occur. At issue is a lower court interpretation of the 1996 Telecommunications Act. That's the landmark federal law that Congress passed to open up these local telephone markets to competition. The thinking is that the more competition that we have in the local markets, the more services that consumers will have, lower rates that they'll pay, that kind of thing, I mean, similar to what we saw in the long distance markets, when they opened up to competition. As the Justice Department has pointed out, those markets have seen a 70 percent drop in rates since we have more competition.

PHIL PONCE: And this case is part of the process along the road to whether individual consumers – how soon individual consumers will have the same choice to pick –

JAN CRAWFORD GREENBURG: That's right.

PHIL PONCE: -- a competing local phone company, as opposed to just being stuck with the one they have now.

JAN CRAWFORD GREENBURG: That's exactly right. Well, obviously, the companies involved – let's say the companies that are offering local service now – the Bell Atlantics, the Ameritechs, the Bell Souths – they would like as little competition as possible, or they would like for it to cost as much as possible for the long distance companies and other would-be competitors to break into their markets. And so long distance companies – the AT&T's, the MCI's, and other potential competitors – trying to break into these markets want it as cheaply as possible. They want as much of the pie, and they want to get it, you know, as cheaply as they can. So that's what we have here. I mean, it's really – the bottom line issue is how much is this going to cost these companies and when are we, as consumers, going to start seeing this enhanced competition?

PHIL PONCE: When you say how much is it going to cost the companies to enter local competition, it's because in this situation the competitors will pay the existing companies – have to pay the existing companies some money for fees to use the existing network. Usually when you think of competition, you think of a new product, a new company, but here, what – the competitors are coming in and using the existing system from the people they're going to be competing against?

JAN CRAWFORD GREENBURG: Right. And that's how Congress set up the Telecommunications Act, because as many people have noted, it would be outrageously expensive, really cost prohibitive, for a new company in most cases to come in and duplicate all the equipment, lay all the phone lines, you know, that kind of thing, and start up and start offering new phone services. So in the act Congress provided three specific ways that new companies could break into these local markets. And under these three ways the local companies have to basically cooperate. For example, if I am a long distance company or a would-be competitor and I have some equipment, the local companies, according to the law, have to allow me to hook into their local networks. That's so customers who would go with a new company can call customers who stay with the original old company that they can make calls back and forth.

Other companies might have some equipment or some facilities, so the law provides that for those companies the local long distance phone companies now in place have to let them hook into their networks to use some of their equipment, and that's a very controversial aspect of the law. And finally, the law provides that the local companies must sell certain services pretty much at wholesale rates so that companies could turn around and offer them at retail rates. Now the case turns on what the local companies are going to charge all the new competitors for each of these three things, and that's why—I mean, that's one of the big issues that the court took up today, and that's kind of at the heart of this dispute. Who is going to determine those rates that the local companies are going to charge?

PHIL PONCE: And on the one hand you have the long distance companies that want to get into local competition and the FCC, the Federal Communications Commission, and on the other side you have the existing local phone companies and the state regulators. What's at stake for each? What does each side want?

JAN CRAWFORD GREENBURG: Well, after Congress passed this law, the FCC set about passing rules to implement it, and one of the rules that it passed provided for a set of formulas to determine some of these prices that the long distance companies would be able to charge – you know, the people trying to break into their markets. That –

PHIL PONCE: So this the FCC setting this formula.

JAN CRAWFORD GREENBURG: That's right.

PHIL PONCE: And the state regulators –on the other hand – are saying –

JAN CRAWFORD GREENBURG: They're saying, wait a minute, this is our turf, we should be setting these prices. So they became obviously very upset by this specific rule, as did the local telephone companies, because they thought that the formula provided for prices that were too low, so they challenged that rule and some other rules, and a federal court sided with the local companies and the state utilities boards, and that was one of the arguments that the court took up today.

PHIL PONCE: What happened in the court today?

JAN CRAWFORD GREENBURG: Well, it was a very – as you can tell –this is a – as this kind of gargantuan business litigation is – it can be so important to us, but it's very technical and sometimes very hard to understand, and so first of all, the court spent two hours deciding or hearing arguments in this case. Normally, it spends an hour on arguments, but because of so many of the complex issues involved, they devoted two hours to this.

PHIL PONCE: Any indications from the questions that the justices were asking what was on their minds?

JAN CRAWFORD GREENBURG: Well, I mean, that's – actually another interesting thing that I saw come out of the argument today. Typically, on many cases, if it's let's say an issue of constitutional law or criminal procedure, the justices will jump right in and whenever the lawyer's standing at the podium, the justices jump right in after he's said a couple of words, and start asking him questions and posing, you know, these hypothetical examples. Today and one reason why I think it's hard for us to divine how these justices might go – is today they sat back and they gave the lawyers a lot more leeway to kind of explain some of these issues and what impact they would have. Now that's not to say that they weren't posing a lot of tough questions. Of course they were, but the lawyers got a little more leeway today to set out what some of these complex and controversial issues were.

PHIL PONCE: And thank you for setting out some of these issues, Jan.

JAN CRAWFORD GREENBURG: Thank you.