AT&T Corp. on Monday said new federal regulations played a big part in its plans to make local phone service available to consumers in 35 states by the end of the year.
A lot can happen in two days.
Today, the FCC opened a review of wholesale network pricing rules that could put a wrench in the long-term plans of the biggest long distance company and some of its largest rivals, who all lease the regional Bell operating networks at discounted rates through the so-called unbundled network element-platform (UNE-P).
Analysts at Legg Mason said today the regulator’s proposed rulemaking signals a possible boon for the four Bell companies and bad news for its local phone rivals. The reason: A new pricing formula may authorize the Bells to charge competitors more money to lease their local phone networks.
The FCC has opened a notice of proposed rulemaking (NPRM) to reevaluate the pricing method state utility regulators use to calculate the rates the regional Bells can charge competitors to lease their networks.
The pricing formula, known in regulatory circles simply as TELRIC (total element long-run incremental cost), is based on the future costs of the Bell companies maintaining new networks.
BellSouth Corp., SBC Communications Inc., Qwest Communications International Inc. and Verizon Communications Inc. say the pricing formula is completely hypothetical and requires them to lease their local phone networks to rivals, including AT&T and MCI, at below cost. Verizon and its Bell brethren argue the formula should be based on their actual costs.
“It is my hope that at the end of this proceeding the market will benefit from a methodology that is less theoretically freewheeling,” FCC Chairman Michael Powell said today in a statement. “The tentative conclusion stated in the item supports this policy direction. While I have heard some concern surrounding the tentative conclusion, our commitment to retaining a forward-looking approach is unwavering. What we are debating is the extent to which realistic assumptions about the incumbent’s network should be included in our pricing rules.”
Last month the FCC released rules directing state regulators to determine whether to preserve the UNE-P or phase it out in designated markets over three years. The ruling signaled a victory for AT&T, MCI, Sprint Corp. and smaller phone companies, such as InfoHighway Communications Corp., Talk America and Z-Tel Technologies Inc.
But some of these companies say the resale platform will serve no practical purpose if they have to pay the Bells significantly more money to lease their networks. Over the last few years, many states have lowered the wholesale phone prices after conducting comprehensive studies based on TELRIC.
This has triggered a fierce war between the four Bells and the biggest long-distance phone companies. Some consumer-advocacy groups say the heated competition has helped spawn lower prices for local and long-distance services in the consumer market, but the Bells and their allies contend the competition is artificial because they are being required to subsidize their rivals.
