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FCC Phases Out Discounts for Local Phone Competitors

December 15, 2004
The Federal Communications Commission is phasing out the discounts big regional telephone companies are required to offer to local competitors. That's likely to further discourage local competition by AT&T, MCI and others.

The commission's decision gives the competitors 12 months to either build their own local networks or work out new leasing deals with the regional companies -- Verizon, SBC, BellSouth and Qwest.

In some cases, the regional companies will still be required to provide discounted rates to competitors serving small and medium-sized businesses but in larger markets network access to the smaller competitors would eventually be eliminated.

For years, the FCC has tried to impose competition in local phone services by requiring the big regional companies to lease space to their competitors at below-market rates. The regional companies have challenged the rules, saying that if competitors want to enter the marketplace, they should have to build their own networks, not get a subsidized ride on someone else's.

The courts have sided with the regional companies in three separate cases, most recently last March when an appeals court in Washington, D.C., threw out the FCC's leasing rules.

Critics say the elimination of the subsidies will stifle competition, but FCC Chairman Michael Powell said new competitors will use wireless, cable television, electricity lines and other channels to provide service to customers.

"Competition and choice for consumers in the information age will continue to grow and thrive," Powell said.

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July 9 2008

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