The Telecommunications Act of 1996 constitutes the most important telecommunications legislation approved in decades by the United States government. The document’s main objective was and still is to promote competition and decrease regulatory constraints at all levels of the telecommunications industry. The main idea behind the Act was that competition would be an efficient replacement of regulations and promote the rapid adoption of better technologies. This would lead to the introduction of new services and lower rates ultimately benefiting the individual consumer. Unfortunately, this has not been the case and many parties are calling for a revision of the Act.
The
Act can be summarized into three main provisions:
·
Establishment
of the Universal Service principle and a system to support it
·
Obliges
LECs to open their network to competition and imposes provisions to assure
this process
·
Number
portability
Service
reselling
·
Permitting
interconnection ‘at reasonable point’
·
Permitting
access to facilities
·
Permits
LECs to offer interLATA long distance
Based on the principle that a telephone’s exponential value increases by its ability to reach almost anyone in the develop regions of the world.
· Telephone service should be guaranteed to those areas where deployment and service provision is not economically attractive for operators: value-of-service-pricing
· Certain services are priced above cost while other are priced below cost (i.e., cross subsidization of services)
· Does not work well in a competition-driven environment as operators do not have an incentive to subsidize services
Rate-of-return
regulation
·
The
FCC regulated toll rates by establishing a ceiling rate of return on capital
invested on Long Lines
· A direct consequence of the Telecommunications Act of 1996 was the FCC’s migration of access charges into a fixed-price scheme
· LECs authorized to levy a new monthly fee, the primary interexchange carrier charge (PICC), on the IXCs
· Service charge was passed directly to consumers
· Could not solve the dilemma: Should ISPs be billed access charges?
Congress
instituted the Universal Service Fund (USF) to provide direct subsidies
to:
·
Rural
areas
·
High-cost
areas
·
Lower-income
subscribers
·
Schools
·
Libraries
·
Rural
hospitals
· On May 31, 2000, the FCC adopted a proposal from the Coalition for Affordable Local and Long Distance Services (CALLS)
CALLS Most Important Provisions |
|
· Eliminates the residential and single-line business PICC · Increases the primary residential and single-line business subscriber line charge caps, beginning at $4.35 on July 1, 2000, and gradually increasing to $6.50 on July 1, 2003, provided that LECs can justify any increase beyond $5.00 · Reviews the subscriber line charge prior to the increase scheduled for July 1, 2002, including evaluation of forward-looking cost information · Recovers LEC universal service contributions directly from end users · Eliminates minimum usage charges by participating long-distance carriers · Commits participating long-distance carriers to flow through reductions in access rates to residential and business customers over the life of the plan |
The
Telecommunications Act of 1996 required some enabling elements that will
allow the development of true competition:
·
An
obligation to negotiate with competitors in good faith
·
An
obligation to permit connection at any technology feasible point
·
A
requirement to provide number portability among carriers
·
An
obligation to provide reciprocal compensation
·
An
obligation for the LEC to permit co-location in their central offices on a space-available
basis
·
An
obligation to share space on poles, conduits, and other physical infrastructure
with competitive local exchange carriers (CLECs)
·
An
obligation to provide advance notice of impending changes in their equipment
The
Act required LECs to allow for number portability – switching from local telephony
service providers without changing the telephone number.
·
Viewed
as a method to foster competition as eliminates customers’ reluctance to switch
service providers as they didn’t want to switch telephone numbers
·
Service
rates become more important as services differentiator
The
Telecommunications Act of 1996 assigned the states telecommunications
commissions the responsibility of determining interconnection agreements between
ILECs and CLECs. Main result has been controversy.
·
How
to determine interconnection agreements stipulations?
·
How
to determine interconnection agreements fees?
·
Lack
of centralization translates into a single company (RBOC) facing different interconnection
regulations in every state it has a presence
The
Telecommunications Act of 1996 permits the removal of long-distance restriction
from the Bell Operating Companies (BOCs) on a state-by-state basis
·
BOC’s
need to provide proof that they were not obstructing the development of competition
in their local markets before submitting an application for the provision of
long-distance service
·
Before
submitting a long-distance service application to the FCC, BOC’s need to obtain
the concurrence from the targeted state’s utilities commission
RBOC’s Current Long Distance Licenses (as of October 15, 2001)
Verizon |
Connecticut |
SBC |
Texas |
|
Service |
Opening to Competition Measure |
|
Long Distance Service |
RBOCs can enter the long-distance market after proving they have opened local markets to competition |
|
Local Services |
Local markets will be opened to new competitors (IXCs and CATV companies). Appropriate access charges to be paid to local telephone companies for linking to their networks must be determined. |
|
Broadcast Services |
Allows a single owner to control TV stations reaching 35% of the population. |
|
Cable Services |
Lift all rate regulations on big cable providers in 3 years. Rate regulations immediately eliminated for providers with less than 1% of US subscribers |
|
Video Services |
Allows phone companies to sell TV services via phone lines, satellite, or other distribution systems |
|
Cross-ownership |
Lifts the ban on cross-ownership between CATV companies and phone companies in small communities |
|
Internet Services |
On-line computer services or users must restrict minors’ access to ‘indecent’ material |
|
Universal Phone Services |
Continues to guarantee phone service everywhere (including rural areas). States and the FCC still must decide how to pay for these services |
|
Wireless Services |
TV stations to get new broadcast spectrum for advanced TV services (still under discussion) |
Source: Hioki, Warren. “Telecommunications”
· The Telecommunications Act of 1996 repercussions were felt not only in the US but also in many foreign countries which look into the FCC as a guide for their own internal regulatory affairs
· At the present time, the Act has failed to decrease rates for residential customers as operators have passed to the consumer all the extra-charges imposed to them by the FCC
· It is still to early to pass judgment on the Act efficiency but, already many players are calling for changes on several of its stipulations
·
BOC:
Bell operating company
·
CALLS:
Coalition for Affordable Local and Long Distance Services
·
CATV:
cable television operator
·
CLEC:
competitive local exchange carrier
·
FCC:
Federal Communications Commission
·
ISP:
internet service provider
·
IXC:
interexchange carrier
·
LATA:
local access transport area
·
LEC:
local exchange carrier
·
PICC:
primary interexchange carrier charge
·
RBOC:
regional Bell operating company