New dominant carriers arise

Dominant carrier rules are a relic of the telecom industry's distant past, if you consider the 1980s distant (I try to). They were put in place by the Federal Communications Commission because, in that era of big hair and "Miami Vice," AT&T was unquestionably the dominant long-distance carrier in the U.S. market. Among other things, these rules forced AT&T to publish its long-distance rates and cap its prices.

More recently, dominant carrier rules were reconfigured as part of the Telecom Act of 1996 to keep incumbent telcos with both long-distance and local service units from using the same network equipment and manpower to offer both services over the same infrastructure in-region. The separation also was intended to keep them from exploiting the local service relationships they had to get customers to sign up for long-distance under secret deals and rate structures. All of this was accomplished by forcing the telcos to run their local and long-distance units as separate operational entities.

About a week ago, the FCC, responding to a petition filed by AT&T, ruled that incumbent telcos no longer need to keep their local and long-distance units separate (It had earlier rescinded the rules specifically for Qwest).

Big telcos argue that dominant carrier rules don't fit in an era of convergence and service bundling. This may be true. It's also true that telcos, now free from these rules, aren't likely to suddenly raise long-distance rates. In fact, they stopped caring about long-distance revenue long ago--the more likely reason why they want to integrate units is to consolidate operational costs. That will make them more competitive, and more capable of offering bundled service rates that can undercut the competition.

There are such a things as dominant carriers in a competitive market. Long ago, there was only one; now there are three. - Dan


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