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ETI is pleased to discuss its latest paper: THE PRICE CAP LECs' "BROADBAND CONNECTIVITY PLAN": Protecting Their Past, Hijacking the Nation's Future-a review of the so called "ABC plan". We also examine wireless market concentration data made public by the US Department of Justice.
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Helping Themselves to Corporate Welfare: The Large ILECs' Plan for Universal Broadband
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More than four decades have elapsed since the FCC embarked upon a mission to introduce competition into the US telecom market. Varying levels of competitive activity have emerged in most telecom sectors, with the notable exception of many rural, low-density areas that are thought to be incapable of supporting multiple providers. The FCC's March 2010 National Broadband Plan noted that at least two competing providers of high-speed Internet access were available to some 82% of the US population, and that for the 5% that still had no access to even one broadband network, high-cost support or other subsidies would be required in order to assure truly universal broadband availability nationwide.
Subsidization of telecom services in high-cost and insular areas has long been a major focus of US telecommunications policy. Initially this was accomplished by charging above-cost prices for certain optional and discretionary services (like long distance, access charges, and calling features) the "profit" from which would be used to support below-cost pricing of basic residential dial tone access and to provide additional subsidy to high-cost areas. The 1996 Telecommunications Act required these "implicit" subsidies to be replaced by explicit support mechanisms. These "Universal Service" funding programs were nominally focused upon voice services; the FCC had yet to extend explicit universal service support to broadband.
In February, the FCC initiated a rulemaking to address Universal Service and Intercarrier Compensation that was intended to consider, among other things, extending explicit universal service support to broadband. On July 29, six of the nation's largest ILEC/wireless/ broadband providers – AT&T, Verizon, CenturyLink, FairPoint, Frontier, and Windstream – offered what they described as a comprehensive plan for reform of universal service and intercarrier compensation, which they called their "America's Broadband Connectivity Plan" ("ABC Plan") for providing support for broadband infrastructure development in high-cost areas explicitly through broad-based contributions to several new funds to be established for this purpose. These seemingly ambitious goals aside, the ILECs' "ABC Plan" is in reality a gambit aimed at protecting its sponsors' subsidized monopoly status and embedded investments in legacy technologies that are actually at odds with the FCC's stated goals.
Continue reading at econtech.com
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The DoJ lawsuit against AT&T/T-Mobile focuses attention on the increase in concentration in individual local markets
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In their April 2011 Merger Petition, AT&T and T-Mobile argued that for purposes of examining the potential impact their merger would have on competition, the relevant geographic market is local, not national in scope. They emphasized that "[a]s the Commission has explained, 'the geographic market is the area within which a consumer is most likely to shop for mobile telephony/broadband services,' and '[f]or most individuals, this market will be a local area, as opposed to a larger regional or nationwide area.'" But having taken that stance, the Petition itself offered scant analysis of the state of competition in these "local" markets, such as might be demonstrated by the post-transaction Herfindahl-Hirschman Index ("HHI") of market concentration and the pro forma change in the HHI. Telecom markets will almost always be more concentrated when viewed at a local rather than a national level: For example, AT&T's and Verizon's wireline market shares are much higher within their respective ILEC footprints than when aggregated nationwide.
Continue reading at econtech.com
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About ETI. Founded in 1972, Economics and Technology, Inc. is a leading research and consulting firm specializing in telecommunications regulation and policy, litigation support, taxation, service procurement, and negotiation. ETI serves a wide range of telecom industry stakeholders in the US and abroad, including telecommunications carriers, attorneys and their clients, consumer advocates, state and local governments, regulatory agencies, and large corporate, institutional and government purchasers of telecom services. |
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