FCC Opens Door to Local Phone Competition : Telecommunications: The action could mean that eventually consumers in Los Angeles will be able to pick local carriers other than Pacific Bell or GTE.
The Federal Communications Commission on Thursday took the first tentative step towards eventually opening local telephone service to a variety of new providers, a move designed to introduce competition into the last remaining telephone market with monopoly service.
Proponents say the thrust of the FCC’s action--to allow independent long-distance carriers to enter the $25-billion market now served only by the regional Baby Bell companies--could lead to lower local phone rates and enhanced services.
In Thursday’s vote, the FCC unanimously approved tentative regulations forcing the seven regional phone companies and GTE to allow competitors access to their networks to provide long-distance service to certain business customers. However, the commission additionally voted to consider expanding competitors’ access to the local networks for all long-distance service.
In the future, local service could be also be provided by the alternative carriers, meaning that consumers in Los Angeles might eventually be able to pick local carriers other than Pacific Bell or GTE.
The FCC move is consistent with its recent pattern of introducing competition into what have traditionally been regulated, monopoly services from the old-line telephone companies. The aim is to give consumers greater choice in service and price.
Ultimately, proponents say, companies entering these markets could do for local phone service what MCI and US Sprint have done to the long-distance business: introduce competition and spark a price war.
However, consumer groups, the National Assn. of Regulatory Utility Commissioners and many local telephone companies sharply disagree.
They argue that the newcomers will simply siphon away the Bell companies’ best business customers, leaving them with residential customers, particularly those in rural areas, with whom the cost of providing service is higher. Ultimately, the critics charge, residential phone rates could rise as local phone companies receive less revenue from business customers with which to subsidize their residential service.
“This is probably not good for the basic ratepayer, but it probably is good for the business customer,” said Michael Miller, regulatory vice president for Pacific Bell, which is opposing the FCC’s tentative action.
The FCC will collect comments on the tentative ruling for the next several months and will consider them before taking a final vote on the matter. An FCC official said a final vote could be taken late this year or in early 1992.
If allowed to stand, the FCC action allows independent long-distance carriers to hook into the local phone companies’ network directly, rather than having to replicate that network on their own.
This means that independent carriers, in essence, can bring their service to a local phone company’s network switch and then use the local network to reach customers. Now, independent local carriers are generally confined to serving a single business because of the prohibitive cost of replicating the local network.
The FCC action came in response to a petition from Metropolitan Fiber Systems of Oakbrook Terrace, Ill., a 3-year-old phone service provider with operations in 11 of the nation’s largest cities, including Los Angeles and San Francisco.
“Today we are a giant step closer to opening up the local loop bottleneck to competition,” said Royce Holland, chief executive of Metropolitan Fiber, a subsidiary of Peter Kiewit Sons, a large, 105-year-old construction and mining company in Omaha, Neb.
FCC Chairman Alfred C. Sikes said the action “builds on an FCC commitment to reducing barriers to competition. . . . One change that should hasten the public’s access to advanced generations of communications services at cost-efficient rates is more customer choice.”
Holland conceded that Metropolitan Fiber is interested in serving business customers, who pay premium prices for phone service. But he said residential customers would benefit from increased competition among phone companies for the business customers.
