NCPA - National Center for Policy Analysis

Competition Lacking In Local Phone Service

September 2, 1999

The 1996 Telecommunications Act was supposed to open local telephone service to competition, but so far that hasn't happened, according to a report from the Federal Communications Commission.

Most local telephone companies are monopolies -- utilities that operate under exclusive franchise agreements with cities that allow them to string wires using city easements. The Act mandated "open access" -- which requires the local telephone companies to allow competitors to use their wires to carry service in exchange for access fees. The fees are supposed to reimburse the utility companies for the cost of access, yet not be set so high that a phone service company can't compete with the utility in pricing services for customers.

  • At the end of 1998, new local phone service suppliers controlled 2.7 million public lines, or 1.7 percent of the market.
  • That is up from 1.7 million lines, or 1 percent of the market a year earlier.
  • The total will likely exceed 4 million lines by the end of 1999.

The regional Bell operating companies, which together with GTE control most local phone service in the United States, say the rise in competitors' lines is proof their markets are open. Until the FCC certifies that there is competition in local service in an area, the Bell companies will not be allowed to offer long distance service. So far, the FCC has denied every Bell request, saying their markets are still closed.

The Consumers Union points out that the bulk of new competition is for high-end business users -- those which want speedier access to the Internet and high-speed data transmission.

Source: Paul Davidson, "Local Phone Competition Increasing," USA Today, September 2, 1999.


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