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COMT 220

Regulation

This Material may be found in:

Cole, Chapter 1. Also in:

Datapro Reports on Communications Networking Services, Report #3002, A History of Telecommunications Regulation.

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Public Utilities

• Monopolies or Near-Monopolies• Having the monopoly is deemed to

be in the public’s best interest• Regulation provides oversight to

prevent abuse• Examples:

– Railroads– Water, Gas, Electricity– Telecommunications

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Jurisdiction

• FCC - Interstate Communications• Intrastate

– PUC (Public Utilities Commission)or PSC (Public Service Commission)

– unless “preempted” by the FCC

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Products and Services

Equipment Local Service Long Distance

Intrastate Interstate

“The Bell System”

Pricing behaviour is regulated by controlling the “Rate of Return”

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Carterphone - 1968

Equipment Local Service Long Distance

Intrastate Interstate

“The Bell System”

SomeCompetitionAllowed

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Specialized Common Carriers

1971-1972

Equipment Local Service Long Distance

Intrastate Interstate

“The Bell System”

SomeCompetitionAllowed

Specialized Services

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After the MFJ - 1982

Equipment Local Service Long Distance

Intrastate Interstate

Specialized Services

IntraLATA

IntraLATA

InterLATA

InterLATA

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The Telecom Act of 1996

Equipment Local Service Long Distance

Intrastate Interstate

Specialized Services

IntraLATA

IntraLATA

InterLATA

InterLATA

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Computer Inquiry I - 1972

• Deregulation of Data Processing• Data Transport remains regulated

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Computer Inquiry II - 1980

• Computer Inquiry I seen as obsolete• Basic data communications services are

now regulated• Enhanced Services are not regulated

– Enhanced Services, including CPE sales, offered by Bell Operating Companies, must be moved to a separate subsidiary WHY ?

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Computer Inquiry III - 1992

• Attempts to deregulate the entire data communications arena

• Creates the concept of “Comparably Efficient Interconnections”

• Creates the ONA (Open Network Architecture) concept

• Never really led to regulation -- until the 1996 Act (which used different words)

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Technical Consequences

• Changes in regulation often force technical changes

• In 1984, deregulation changed the number of long-distance providers from 1 to 2 or more -- what are the issues?

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Technical Consequences of the MFJ

• Customer must be able to indicated via dialed digits which provider to use– Initially - Use line side access– Interim - Use Feature Group B 950-10xx

• Long-term: Replace all central office switches with program control switches capable of doing database lookups.– Introduce 10XXX (now 1010XXX override

codes)

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Introduction of Competition

Before:

Local Service Long Distance

All Costs are combined in the “Rate Base”

Regulators set prices based on policy/politics

Total provider revenue is correct

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Competition cont…

• After

Local Service Long Distance

Prices and costs are not divided equally, revenues are no longer correct.

Implicit subsidies are replaced by explicit payments.

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Local Service Competition

Rural Area Service Urban Area Service

All Costs are combined in the “Rate Base”

Regulators set prices based on Universal Service mandates/desires; cost-based rural service may not be reasonably affordable

Total provider revenue is correct

QUESTION: What happens if these services are deregulated and provided by multiple companies?