CEI Critiques Federal Telecom Price Controls

CEI Critiques Federal Telecom Price Controls

Submits Comments on FCC’s TELRIC Regulations
December 25, 2003

Full comments available in pdf format


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Jody Clarke, 202.331.2252



<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Washington, D.C., December 23, 2003—The Competitive Enterprise Institute has submitted comments to the Federal Communications Commission on its pricing regulations for competition in local telecommunications services, highlighting the inefficiencies and market-distorting effects of the current regime.  Currently, new competitors in local phone markets are allowed to lease network capacity from the incumbent local carriers at below-market rates, calculated by a pricing formula known as TELRIC.


Problems with the current regulatory structure include the assumption that the costs of hypothetical future network are a good guide for today’s investment decisions, a problem the FCC’s Notice of Rulemaking recognizes. Also, CEI’s comments draw the FCC’s attention to the tendency of the TELRIC regime to undermine voluntary negotiations as a foundation to the creation of a wholesale market in leasing network capacity. 


The TELRIC regime could be improved by considering the costs incurred by incumbent phone companies and by other firms building new networks. Using data from other, non-TELRIC proceedings, including universal service proceedings and arbitrations, would help make cost determinations more neutral and accountable. CEI encourages the FCC to consider how changes to TELRIC would affect the success rate of voluntary negotiations; more successful negotiations should be both a goal of the FCC’s rules and a measure of their success.


“At the end of the day, no regulation can substitute for the market process,” said CEI Senior Policy Analyst Solveig Singleton.  “The solutions we suggest the FCC consider, while in some details still imperfect, are intended to counterbalance TELRIC’s worst flaws.”


To read the full text of the Competitive Enterprise Institute’s comments on TELRIC to the Federal Communications Commission, please click on the link above 

CEI is a non-profit, non-partisan public policy group dedicated to the principles of free enterprise