June 14 (Bloomberg) -- AT&T Corp. and other companies lost a U.S. Supreme Court bid to keep renting local-phone networks at a discount while they seek the justices' review of a decision that voided rules allowing the discount.

Chief Justice William H. Rehnquist rejected AT&T's emergency request to keep the Federal Communication Commission rules in place beyond tomorrow's expiration date. The rules, struck down by a lower court in March, require local-phone providers such as Verizon Communications Inc. to open their networks to rivals at discounted rates.

``These FCC rules have led to the creation of local competition for literally hundreds of millions of telephone lines,'' lawyers for AT&T, MCI Inc. and other companies said in court papers filed in Washington. Allowing the rules to expire would lead to ``dire economic consequences'' for the companies, their lawyers said.

FCC Chairman Michael Powell said last week he wants the agency to write new rules that would phase in any price increases for companies leasing local-phone networks. AT&T, MCI and other recent entrants to the local-phone business have lured more than 15 million customers using the discounts. The companies say that without the discounts, competition will decrease and people will pay more for phone service.

New York-based Verizon, the biggest U.S. local-phone company, and other regional carriers say they are being forced to lease their networks below cost, discouraging them and competitors from spending on equipment upgrades.

The U.S. Circuit Court of Appeals for the District of Columbia ruled in March that the rules were illegal under the 1996 Telecommunications Act.

Bush Administration Rejection

Last week, the Bush administration and the FCC decided not to support a Supreme Court appeal by Bedminster, New Jersey-based AT&T and the other companies. AT&T and Ashburn, Virginia-based MCI are the No. 1 and No. 2 long-distance phone carriers.

After U.S. Solicitor General Theodore Olson announced the administration wouldn't back AT&T's appeal, FCC member Kevin Martin, who previously supported AT&T, said he changed his mind. That tipped the five-member commission against backing an appeal.

San Antonio-based SBC Communications Inc. said last week it won't unilaterally raise wholesale rates for at least the rest of the year, while BellSouth Corp., based in Atlanta, will seek state approvals before increasing prices. Verizon won't raise rates for several months, said company spokesman Larry Plumb.

In addition to rivals that rent local-phone equipment, the regional phone carriers have been losing customers to wireless phone carriers, sellers of Internet-based calling and cable television companies that use their own wires for phone service.

Rehnquist handles emergency requests involving appeals from the District of Columbia.

The case is AT&T v. U.S. Telecom Association, 03-A1010.

To contact the reporter on this story: Laurie Asseo in Washington at lasseo1@bloomberg.net.

Last Updated: June 14, 2004 14:39 EDT