The Competitive Balance of the Industry Hangs in the Balance

(Washington, D.C.) – Earlier today, the House Energy and Commerce Committee Subcommittee on  Telecommunications and the Internet held a hearing entitled, “Health of the Telecommunications Sector: Perspective of Investors and Economists,” during which several analysts promoted killing key parts of the Telecommunications Act of 1996.  Council for Citizens Against Government Waste (CCAGW) responded by imploring Federal Communications Commission (FCC) Chairman Michael Powell to drop current proposals that would diminish competition, while increasing corporate welfare.

“Rule changes proposed by the FCC would pull the rug out from under the competition that is finally beginning to develop in the Bells’ $112 billion-a-year market for local telecom services,” CCAGW President Tom Schatz said.  “With a stroke of a pen, the FCC would sweep away the promise of competitive choice made to phone customers when Congress passed the Telecom Act of 1996.”

The proposals being considered by the FCC would eliminate the key market-opening provision of the Telecom Act by ending the Bells’ obligation to lease out capacity on their publicly subsidized local networks to competitors.  Then, it is expected that the FCC will declare that broadband capacity is not part of telecommunications, and, therefore, not subject to regulation under the Telecom Act.

“Access to leased broadband and analog capacity is essential to the competition that is finally beginning to take root in the Bells' monopoly territories,” Schatz continued.  “By removing this access, the FCC would be eliminating local competition, strengthening the Bell monopoly and opening the door for an even bigger Bell monopoly for the provision of combined local, long distance, and high-speed Internet access.”

The four regional Bell phone companies are already among the greatest beneficiaries of corporate welfare in America.  For example, the Bells directly collect $13.8 billion in access charges for handling the long distance calls that have to travel in and out of the their local networks.  In addition, the lack of full competition in the local phone market is costing Americans more than $9 billion a year in potential savings. 

“The FCC appears ready to give the Bells a gift that the rest of America simply can not afford,” Schatz concluded.  “The FCC should be curbing the Bells’ appetite for handouts by opening their markets to competition, not giving them an even bigger handout at the public’s expense.”

The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Government Waste, the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.