National
National regulation is critical in most areas of the world, although less so in the case of the EC member nations, which have ceded a good deal of this privilege to the regional authority. For the most part, each nation has rules, regulations and standards which serve its requirements. Areas of influence often include such issues as competition, rates and tariffs, and radio frequency spectrum allocation. National authorities also determine the basis on which international carriers will be allowed to establish connections (landing points) in that nation for purposes of interconnection with the national network. Examples include The Federal Communications Commission (United States) and AUSTEL (Australia). New Zealand is most unusual in that the national network was entirely deregulated, with the regulator also being abolished; while no other nation has embraced that philosophy, the United States is considering abolishing the FCC.
State
State or province regulation is in place in many countries, such as the United States and Canada. Issues of intrastate competition, and rates and tariffs are managed at this level. State Public Utility Commissions (PUCs), also known as Public Service Commissions (PSCs) were formed in the United States beginning in 1937. In some cases, the state PUCs have taken the lead in terms of deregulation and competition. Illinois, for instance, for years and well before the federal Telecommunications Act of 1996, has allowed some level of competition within the local exchange. In Chicago, in specific, CAPs have been providing local and Centrex service in competition with the LECs.
Local
Local regulation enters the picture relative to local zoning ordinances which might dictate wireless tower placement and allowable height, CATV franchises, and cable right-of-way. In Milpitas, California, for instance, the local regulators demanded the right to levy franchise taxes against Pacific Bell when the LEC sought right-of-way permission to lay fiber optic cables to deliver CATV programming in competition with the incumbent CATV provider. PacBell refused to submit, arguing that it was regulated by state and federal governements rather than the local authorities. As a result, the Information Superhighway ground to a halt in Milpitas in 1994.
In some instances, local regulation predominates; Alaska and certain Scandinavian countries are unusual in that many of the LECs are municipally owned-commercial carriers had no interest in providing high-cost service in such sparsely populated areas.
Rates and Tariffs
Carriers traditionally have been required to file with the appropriate regulatory authority a set of tariffs, which describe the services which the carrier intends to offer in that domain; the rates which it proposes to charge for them; and the proposed obligations, rights and responsibilities of the both the carrier and the customer. The regulatory authority examines the tariff filing, holds public hearings on the proposal and renders a binding decision, which can be appealed by the carrier to the regulator or even through the judicial system [6-3].
The regulatory authority is in the form of a PUC (Public Utilities Commission) at the state level, with the authority to regulate intrastate issues. National regulation is the domain of the FCC, which has the responsibility to determine all interstate issues, including radio frequency allocation.
Regulators evaluate tariff filings and determine rate schedules based on a complex and varying set of considerations including allowable costs of service provisioning and support, which involves both capital investment and operating costs of the carrier. Particularly at the state level, an attempt is made to restrict rates to reasonable and affordable levels. At the same time, the regulator must permit the carrier a rate of return on investment (ROI) that is reasonable and which positions the company well to secure necessary funds for expansion and enhancement of its facilities through the capital (stock) and debt (bond) markets. Additionally, the regulators generally attempt to ensure that residential service is universally available at reasonable cost. As a result, business users traditionally have supported low residential rates through a complex set of cross-subsidies. Basic service rates for access services (local loops) generally are kept at low levels; enhanced services (e.g., voice mail, custom calling features and long distance) are considered to be optional and, therefore, are priced to yield more profit in support of basic services.
As the network monopolies were dismantled and the trend toward competition developed, the various regulators tended to focus on the incumbent and dominant carriers in their respective domains. Beginning with the Carterphone decision in 1968, carrying through the MFJ (Modified Final Judgement) in 1982 and continuing into the Telecommunications Act of 1996, the emphasis, therefore, has been on AT&T and the LECs. The intentions of the FCC and now the PUCs are to encourage competition by providing the new entrants with an advantage; once the incumbent carriers (AT&T and the LECs) have demonstrated that their positions are no longer dominant, the regulators relax restrictions on them in favor of allowing market forces to prevail. This intent has been demonstrated with respect in the IXC market, as the FCC gradually has relaxed its requirements of AT&T. This trend is expected to continue as a result of the Telecommunications Act of 1996, which will be discussed in detail in Chapter 16.
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