By RICHARD CARELLI Associated Press Writer

WASHINGTON (AP) -- The Supreme Court rejected challenges, led by California and New York officials, stemming from federal regulators' decision to let regional Bell companies offer more than basic telephone service.

The court, without comment Monday, refused to hear arguments that the Federal Communications Commission unlawfully is pre-empting state regulation of the Bell operating companies.

The dispute arose from several commission decisions to allow the operating companies to offer customers ``enhanced services'' -- a combination of basic local telephone service and various information services such as voice mail.

The commission abolished a rule that had required the telephone companies to offer such services only through subsidiaries, and barred states from imposing such separation in the offering of enhanced services.

The 9th U.S. Circuit Court of Appeals eventually upheld the pre-emption aspect of the commission's orders, which had been attacked by state regulators in New York, California, Florida, Pennsylvania and the District of Columbia and numerous information-service competitors.

In the appeals acted on today, lawyers for New York and California argued that the appeals court's Oct. 18 ruling conflicts with the dual regulatory system created by the 1934 act that created the FCC.

The commission was empowered to regulate interstate communications but the individual states were left in charge of regulating intrastate communications.

The California Public Utilities Commission said the appeals court ruling ``allows the FCC to dismantle the jurisdictional fence ... which Congress so carefully constructed.''

The 9th Circuit court's ruling ``would leave the nation with a `one fits all' agenda'' instead of a dual regulatory system ``with state regulators developing new means of improving local telecommunications services,'' New York's Public Service Commission told the justices.

Clinton administration lawyers and the commission's general counsel urged the court to reject the appeals.

They said the court previously ``has recognized that the realities of technology and economics blur the boundary lines between federal and state regulatory domains'' -- especially when rates are not involved.

The cases are California vs. FCC, 94-1173, and New York vs. FCC, 94-1213.

AP-WS-04-03-95 1105EDT

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