New Chance for Local Telephone Competition

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Contact for Interviews:     <?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />

Richard Morrison, 202.331.2273

Washington, D.C., August 22, 2003—The Federal Communications Commission’s just-released “Triennial Review” rules substantially deregulate telco-provided broadband services.  But the rules also hand states the power to determine the future of traditional “narrowband” local phone competition. State regulators have 90 days to figure out how competitive their local phone service is and nine months to craft their own rulemakings. Only local markets deemed competitive will get relief from regulation.  The ruling affects large phone companies like Bell South, Verizon, and SBC, their rivals AT&T and MCI, and a host of smaller firms that use parts or all of the local phone networks.

Representatives of some states view the ruling as a victory for “states rights.” But the FCC’s decision to let individual states decide which local markets are sufficiently competitive means more uncertainty for telecom markets and investors. And state regulators may balk at following the FCC’s deregulatory lead. TeleNomic Research President Stephen Pociask’s study, recently released by CEI and the New Millennium Research Council, clearly shows that many of the new firms expected to provide competition in local phone markets are actually abandoning their own facilities because regulators offered them a better deal to use the old monopoly network. This means fewer real choices for consumers.

CEI’s Solveig Singleton comments, “State regulators need to pay attention to the data. It shows that regulators’ unbundling rules have failed to encourage the build out of new facilities that offer consumers real alternatives. They must be open to a new approach. The best course would be clear rules that give the CLECs time to adjust their business plans to build their own networks. Not all the CLECs will survive this process, but consumers will get real choices.”

CEI is a non-profit, non-partisan public policy group dedicated to the principles of free enterprise and limited government.  For more information about CEI, please visit our website at www.cei.org.