Outlook Dim for Revised Accounting System Needed for Changing Telephone Industry

FGMSD-80-9: Published: Nov 13, 1979. Publicly Released: Nov 13, 1979.

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The telephone industry has been regulated on the premise that it is a natural monopoly. However, over the past years the Federal Communications Commission (FCC) has allowed competition in the terminal equipment and intercity communication areas. To provide better current information to Federal and State regulators, industry managers, and other users, the FCC began to develop a revised Uniform System of Accounts. The system was intended to make it possible to determine the cost of specific telephone services for improving regulatory rate review and detecting anticompetitive pricing practices.

In a review of current and proposed legislation, testimony, documents, reports, and the views of State regulatory commissions, GAO found that unless many problems are solved, the outlook is dim for early implementation and effective use of the new system. Weaknesses exist in the FCC approach to developing the system and planning for its implementation. State regulatory commissions raised concerns about some aspects of the proposed system, and industry representatives have voiced criticism to the FCC. The FCC approach to developing a revised system has been characterized by a lack of continuous, overall direction and coordination, a limited involvement of the FCC accounting staff, sporadic and fragmented assignment of staff members, a lack of involvement in the system conceptualization by the systems ultimate users, and minimal contact with interested parties during systems conceptualization.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Chairman of the FCC should formally appoint a sufficiently high-level official to provide continuing and consistent direction and to monitor progress being achieved; assign responsibility within the Commission for all phases of development and implementation; define the specific needs of intended users of the revised system within the Commission; improve the mechanism and procedures for coordination with State regulatory commissions to avoid imposing duplicate accounting and reporting burdens on the industry; assess the resource needs of the Commission to provide an appropriate level of monitoring and to effectively and efficiently use reported information after system development; explain how system development will be coordinated with other major actions which may be required, such as revising separations procedures and determining appropriate cost allocation methodologies; and identify the reporting requirments that the industry will need to follow.

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