Publication Type: Talking Points
Date: 7/24/2008
Cable’s competitive offering of telephony has brought significant benefits to U.S. residential and small business customers with estimates that consumer benefits will equal more than $111 billion over the next five years. As of March 2008, 16 ½ million customers subscribe to cable voice service, and that number is growing rapidly as cable providers continue to roll out their voice service across the country. Through the end of 2007, consumers had already saved $23.5 billion thanks to cable phone competition.
Competitive voice services cannot survive without physical interconnection to the ILEC-controlled public switched telephone network (PSTN) at a fair and reasonable rate. Despite their claims that the phone market is “competitive,” the ILECs still serve the vast majority of Americans and still enjoy near-monopoly power in most markets in the country.
Congress in 1996 correctly recognized that the ILEC’s monopoly control over the PSTN, a network funded by ratepayers, gave them the incentive and the ability to frustrate competition by impeding interconnection with other voice providers. The 1996 Telecom Act provided interconnection rights to competitive local exchange carriers (CLECs) so they could exchange traffic with the ILECs on an economic basis, without glitches or delays, in order to promote local voice competition. These rights are critical to all competitors, including facilities- based competitors such as cable and cellular companies, because consumers simply won’t buy a telephone service if they can’t easily speak to friends and acquaintances served by the ILECs.
The ILECs have no incentive to enter reasonable commercial interconnection agreements with any potential competitor. Despite the interconnection rules enacted by Congress in 1996, more than ten years later the ILECs still owned the only ubiquitous phone network – serving 88% of the residential market – and they still serve as the “hub” to which all other carriers must connect in order to reach each others’ customers.
The Bells’ consolidation increases the need for interconnection protections. When the two largest CLECs in the market (AT&T and MCI) merged with the two largest Bells (SBC and Verizon), the most experienced and well-funded negotiators of interconnection agreements were removed from the competitive voice market. The AT&T/ BellSouth merger only solidified the Bells’ monopoly market power and make it more difficult for competitors to get a fair shake in interconnection negotiations.
The interconnection rights Congress established in 1996 must apply to all providers on a technology neutral basis. Some states and incumbent telcos are seeking to limit interconnection rights based only on the technology used by a voice provider. Limiting interconnection and related rights to providers of voice services using traditional technology will ensure the ILECs retain their dominance by hampering the introduction of IP-enabled voice services – the best hope for competition in the voice market.
Basic interconnection rights necessary for all voice competitors include:
- The right to interconnect to the incumbent phone company’s network anywhere it is technically feasible, including at the incumbent’s switch, at rates that are based on the incumbent’s costs.
- The right to collocate equipment on the premises of the incumbent local exchange carriers, to ensure efficient interconnection.
- The right to obtain telephone numbers directly from the administrator of the North American Numbering Plan.
- The ability to have access to poles, rights of way and conduits at reasonable cost-based rates.
- The right of customers to move their existing telephone number from one carrier to another (number portability) in a quick and efficient manner and not to dial extra digits to reach customers of other carriers (dialing parity).
- Guaranteed access to incumbent phone company databases for customer service record information, directory listing information and other local service requests through established interfaces and systems.
- Access to incumbent carriers’ circuits at cost-based rates to carry traffic from one network to another (transiting).