The US Federal Communications Commission has decided to support AT&T Co’s request that the company’s telephone rates, rather than its profits, should be capped (CI No 1,138). The FCC ruling, decided on 3-0 vote and effective from July 1, allows AT&T flexibility to set prices for long distance services, within limits established by the agency; […]
The US Federal Communications Commission has decided to support AT&T Co’s request that the company’s telephone rates, rather than its profits, should be capped (CI No 1,138). The FCC ruling, decided on 3-0 vote and effective from July 1, allows AT&T flexibility to set prices for long distance services, within limits established by the agency; it replaces a rate of return regulation. The ruling sets a limit on rate increases of inflation less 3%; this figure represents an expected 2.5% productivity gain based on AT&T’s historical data and a 0.5% consumer dividend. The price cap applies to three broad baskets of phone service: one category is for toll-free 800 services, another for services used by large business customers, and a third classification for residential and small business customers; the FCC’s judgement lets AT&T increase rates for some services beyond the limit, as long as the basket as a whole meets the cap. The Commission also established some upward and downward movement on prices and stipulated that prices for residential long distance service must fall 2% per annum in real terms; the FCC also imposed a 5% limit on price cuts, to minimise possible anti-competitive conduct. The FCC will also seek industry opinion on price limitations for local exchange carriers, and aims to introduce price caps for these companies, also by July 1; the proposal for the local exchange carriers would make price caps mandatory for the largest local carriers, including the seven regional Bell operating companies, and optional for smaller carriers. The commission estimates that consumers could save about $900m over the duration of the four year initial period of the plan; $700m would benefit residential phone users and $200m to business users.
