European Commission, FCC Disagree on Competition

As U.S. competitive local exchange carriers and cable companies await key decisions from the Federal Communications Commission, the quantitative tests of "effective competition" are key. And on that score the FCC and the European Commission do not see eye-to-eye. In the video arena, the FCC targets the 30-percent market capture level as denoting "effective competition." In the voice services area the test seems to be 20-percent share loss by incumbents. The EC doesn't even think 50-percent loss of market share by incumbents is sufficient.

The disparities in thinking about what marks "effective" levels of competition leaves at least some room for new thinking on what measures might be required to stimulate even more robust levels of competition. In mass markets, 30 percent quite often is the share held by the market leader.

$2.4 Billion CLEC Decision Near

Sometime between now and Dec. 5th, the Federal Communications Commission is slated to make decisions that could significantly raise wholesale access and transport tariffs in six markets, including Boston, New York, Philadelphia, Pittsburgh, Providence, and Virginia Beach.

Customers can anticipate an additional $2.4 billion in extra charges for communications services, according to a study by QSI Consulting, if the rules are relaxed.

Basically, Verizon argues that market competition in each of the six markets is equivalent to that found in the Omaha, Neb. market, the benchmark used by the Federal Communications Commission to deregulate wholesale access rules and rates that have been favorable to competitors.

Up to this point, competitors in the six markets have been able to buy wholesale access and transport at rates below “retail” special access rates. Should Verizon prevail, it would be free to raise prices as it sees fit, with the likely result that wholesale rates would rise to just about what the retail special access rates are.

QSI estimates increased telecommunications expenses incurred by consumers for retail mass market, enterprise, and broadband access services would be $1.054 million, $747 million, and $565 million.. This amounts to a rate increase of $114 annually for an average household, QSI says.

Users in New York would wind up paying as much as $1.4 billion extra. In Philadelphia costs could rise $345 million; $380 million in Boston; $104 million in Virginia Beach and $177 million in Pittsburgh.

Consumers would wind up paying as much as $1 billion more for services; enterprises $751 million and broadband access users $565 million.

Opponents of the plan tend to think they have done what is needed to make the FCC commissioners aware of how woefully undeveloped access competition is in the six markets. But one never knows.

“The concern is that though the numbers are clear, there are media issues also on commissioner minds,” says Covad VP Angela Simpson. The danger is that the forbearance issue might wind up being a bargaining chip as commissioners grapple with the broader media deregulation issues.