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News Release
November 12, 2002
CONTACT: David Fish
(202) 289-8928

Free Lunch for Telcos Threatens Jobs
Telecom Study Warns of Economic Impact of "Fake Competition"

WASHINGTON, D.C. - Should such companies as AT&T and Worldcom be granted a reduction in what they pay for the use of another company’s network and facilities? That is what Pennsylvania’s Public Utility Commission must decide in the very near future. In a study released today, a top telecommunications expert recommends against such action in Harrisburg because it could cost jobs and harm needed telecommunications investment and innovation across Pennsylvania.

“The Pennsylvania commission is now being asked – as part and parcel of a coordinated, national strategy led principally by AT&T and Worldcom – to drastically lower the rates at which the incumbent local carriers like Verizon currently must share network elements,” writes Randolph J. May, senior fellow and director of communications policy studies at The Progress & Freedom Foundation. “AT&T and Worldcom claim they cannot ‘survive’ as ‘competitors’ unless they can obtain…greatly subsidized rates. Threats concerning their willingness to remain in the marketplace seem to be an extreme bit of posturing. But…the fact of the matter is that what is important is to have in place policies that encourage facilities-based investments on the part of both the incumbents and the CLECs [competitive local exchange carriers].”

Under the 1996 Telecommunications Act, incumbent local telephone companies must share with competitors pieces of their local networks (either separately or as an assembled package) in accordance with Federal Communications Commission regulations. State utility commissions set the actual rates competitors must pay, subject to FCC-established pricing methodology.

May’s new study, “Pennsylvania Faces A Choice: To Continue to Promote Real Telecom Competition – Or Not,” says the impact of the policy would be that “Investment in new advanced telecommunications facilities by Verizon will be stifled, and the CLECs themselves will lose all incentive to invest in new facilities in order to build sustainable businesses. Innovation in network infrastructures and new services will dry up, with an inevitable further adverse impact on jobs in the already-decimated telecom and related high-tech sectors of the economy. And the Commission will have retreated down a path of ‘managed competition’ in which it will be pressured to set –and continually reset– UNE prices at levels at which the CLECs claim they need to ‘survive’. In other words, the Commission will have bought into the idea that its role is to maintain a regulatorily-ordained ‘market share.’”

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation