Wednesday, June 23, 2004 - The Progress & Freedom Foundation Blog

The Missing Element

This afternoon, an anonymous regulator emailed the following.

AT&T recently announced that it will stop competing for local and long-distance residential customers in 7 states. Z-Tel made the same announcement for 8 states. AT&T's assigns blame solely to "a June 9 decision by the Administration and the FCC not to appeal a recent Federal court decision that overturned FCC wholesale rules put in place to introduce competition in local markets."

Notice that both AT&T and Z-Tel will continue offering services to the business market. Why should that be, given that the FCC's national "no-impairment" finding in enterprise (business) markets means that, at worst, the mass (residential) market will be treated the same as business?

The answer to anyone familiar with telecom regulation is that residential rates (of at least the ILEC) are artificially capped by either state commissions or legislature. Business rates are often twice as high as residential (even though the average cost to serve business is likely lower than that of residential) to subsidize low residential rates. The result, of course, is plenty of competition in the business market, with or without UNE-P, and competition in residential markets only where state actors have created suffiicient margin for the CLECs to enter.

AT&T's real complaint, then, is with state regulators and legislatures - they should end the price squeeze by ending the residential subsidy. But then, that doesn't play as well with the masses, does it?

posted by @ 5:16 PM | General