When Congress passed the Telecommunications Act earlier this year, its intent seemed clear. It wanted to promote rapid deregulation, opening markets to competition and stimulating the development of new services and technologies in everything from local phone companies to cable television firms.
But it was left to the Federal Communications Commission to implement the act. This month, in its first action under the new law, the commission issued more than 600 pages of rules spelling out exactly how companies like Chicago-based Ameritech must open their local monopolies to long-distance rivals.
The companies were relieved to have the rules laid out and applied uniformly across the nation. But the sheer volume and complexity of the rules invite delay and betray a basic distrust of the market. And over the long term, the rules could chill any incentive to innovate and reduce prices.
The commission ordered phone companies to let potential rivals plug into their networks or, if they choose, lease only parts of them, such as the local switches or databases. It laid out a scheme for pricing the “unbundled” parts, based partially on forward-looking costs. And it said the Baby Bells must offer discounts of 17 to 25 percent below retail rates to rivals who will resell the service. The FCC left it to state regulators to account for local conditions and set the actual discount rates.
But by requiring existing phone companies to open so much of their networks to resellers and to price the parts on estimates of future costs, the commission may undercut the new law’s goal of encouraging quick deployment of advanced telecommunications.
That’s because there’s little incentive for new entrants to spend to build their own networks when they can use those of the phone companies. Neither is there as much reason for phone companies to invest in new technology if they know they must offer it to resellers and quickly lose competitive advantage. Similarly, there’s little incentive to operate more efficiently and lower costs if it will undercut the price you can charge competitors for using your network.
Still, with the new rules in hand, Dan Miller, chairman of the Illinois Commerce Commission, predicts AT&T and MCI will be offering local phone service in the Chicago area by the end of this year and that Ameritech will be offering long-distance service by next spring. Such competition would be welcome. The companies say they want it, but their actions frequently belie that as they stall and maneuver for every advantage. As with any sweeping regulations, the FCC has only given them and their lawyers more opportunities for delay.
The new FCC rules are a beginning. The commission still must reform the access charges that local phone companies collect from long-distance carriers and decide how to guarantee all Americans some basic level of phone service. It’s a daunting task. But the FCC could have shown more trust in the decisions of investors and consumers and could have built in incentives for innovation and efficiency, instead of attempting a regulatory answer for everything.
