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Today the Commission adopted an Order that allows competition, rather than regulation,
to determine prices for interstate access services, thus providing customers more choices among
services, carriers, and rates. The Order gives the nation's largest telephone companies
progressively greater flexibility in setting interstate access rates as competition develops, gradually
replacing regulation with competition as the primary means of setting prices.
Long distance companies purchase interstate access service from local telephone
companies to reach end user customers. Today's Order changes rules that govern the provision of
interstate access services by local exchange carriers (LECs) subject to price cap regulation to
make them more compatible with the development of competition in the marketplace. These
reforms will enable those companies to compete more efficiently, and customers of interstate
access service should benefit from increased choices among carriers and lower overall rates.
The Order grants greater pricing flexibility to price cap LECs as competition for specific
services develops, while ensuring that such flexibility neither deters efficient entry nor results in
unreasonable rate increases for customers without competitive alternatives. In particular, the
Order:
- Grants immediate relief by:
- Permitting price cap LECs to file tariffs for new services on a streamlined basis,
without prior approval or cost-support requirements
- Permitting price cap LECs to define the scope and number of zones for
geographic deaveraging rates for services within the trunking basket, so long as
each zone, except the highest-cost zone, accounts for at least 15 percent of the
incumbent LEC's trunking basket revenues in the study area and rate increases are
limited to 15 percent per year
- Permitting price cap LECs to remove interstate intraLATA toll services and
corridor services from price cap regulation, upon full implementation of intra- and
interLATA toll dialing parity
- Establishes a two-phase framework for granting additional pricing flexibility:
- Phase I -- Price cap LECs must demonstrate that competitors have made sunk
investment in facilities needed to compete with the price cap LECs in the provision
of the services at issue, within a particular metropolitan area
- Permits price cap LECs to offer contract tariffs and volume and term
discounts for those services, on one day's notice
- Requires price cap LECs to maintain their generally available, price-cap
constrained tariffed rates
- Phase II -- Price cap LECs must satisfy a more stringent showing for
competition for the services at issue, sufficient to preclude the LECs maintaining
unreasonable rates
- Permits price cap LECs to offer some services free of the Commission's
rate structure and price cap rules
- Permits price cap LECs to file tariffs on one day's notice
- Establishes service-specific triggers for granting Phase I and Phase II relief:
Dedicated transport and most special access services
- Phase I trigger -- competitors have collocated and use competitive transport in
15 percent of a price cap LEC's wire centers in a metropolitan area, or in wire
centers accounting for 30 percent of the price cap LEC's revenues from those
services in that area
- Phase II trigger -- competitors have collocated and use competitive transport in
50 percent of a price cap LEC's wire centers in a metropolitan area, or in wire
centers accounting for 65 percent of the price cap LEC's revenues from those
services in that area
Channel terminations (special access facilities that carry traffic from LEC end offices to customer premises)
- Phase I trigger -- competitors have collocated and use competitive transport in
50 percent of a price cap LEC's wire centers in a metropolitan area, or in wire
centers accounting for 65 percent of the price cap LEC's revenues from those
services in that area
- Phase II trigger -- competitors have collocated and use competitive transport in
65 percent of a price cap LEC's wire centers in a metropolitan area, or in wire
centers accounting for 85 percent of the price cap LEC's revenues from those
services in that area
Traffic sensitive and common line services
- Phase I trigger -- competitors must offer service over their own facilities to 15
percent of incumbent LEC customer locations in a metropolitan area
- Phase II trigger -- subject of the Further Notice of Proposed Rulemaking
- Price cap LECs exercising Phase I or Phase II flexibility are required to give up the
low-end adjustment mechanism on a holding company-wide basis.
- The Notice seeks comment on a number of other issues:
- Geographic deaveraging of rates for services in the common line and traffic-
sensitive baskets
- Rate structure for the local switching service category of the traffic-sensitive
basket and for tandem-switched transport and whether capacity-based charges,
rather than per-minute charges, better reflect the manner in which the underlying
costs of these services are incurred
- Adjustments to the traffic-sensitive and trunking price cap index formulae for
these charges so that price cap LECs do not enjoy all the benefits of growth if they
have not been exclusively responsible for creating that growth
- Market-based or other approaches to ensure that rates charged by competitive
carriers are just and reasonable.
Action by the Commission August 5, 1999 by Fifth Report and Order and Further Notice
of Proposed Rulemaking in CC Docket No. 96-262 (FCC 99-xxx); Chairman Kennard,
Commissioners Powell and Tristani; Commissioner Ness approving and issuing a statement;
Commissioner Furchtgott-Roth approving in part, concurring in part, and disssenting in part and
issuing a statement at a later date.
- FCC -
COMMON CARRIER BUREAU CONTACT: Tamara Preiss, 202/418-1520
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