"We will be appealing it," said Nanci Bernstrom, US West's director of information for federal relations. "It's unfortunate because consumers will be the losers. The FCC has stifled one of the real tangible benefits of the (1996) Telecom Act which was greater competition and better value."

Earlier, the FCC concluded that US West's arrangement, and a similar deal involving Ameritech Corp, violated a provision of the Telecom Act barring the regional Bell companies from offering long distance service to their customers until they opened their local networks to competitors.

Under the US West programme, called Buyer's Advantage, customers in the Bell's 14-state region could purchase a package of phone services including 10 cents per minute long distance provided by Qwest.Qwest paid the Bell a fee for each referral.

Started in May, the programme quickly enrolled about 130,000 people in its first three weeks. But in June, long distance carriers including AT&TCorp and MCI WorldCom Inc filed suit and a federal court ordered the programme suspended until the FCC could assess its legality.