In response to a congressional request, GAO reviewed: (1) the Federal Communications Commission's (FCC) efforts to track and evaluate the effects of its regulatory decisions on telephone service, particularly in rural areas; and (2) the key issues and problems facing rural telephone companies and subscribers.

GAO noted that, to monitor residential telephone service, FCC currently: (1) reviews U.S. Census Bureau data on the percentage of households with telephone service and Bureau of Labor Statistics data on nationwide price changes in residential telephone service; and (2) gathers data on the total amount of revenue increases major telephone companies requested and the total amount of increases they were awarded by state public utilities commissions. GAO found that: (1) the percentage of U.S. households with telephone service has remained relatively stable since 1983; (2) the nationwide price increase during 1985 for total residential telephone services was approximately equal to the general rate of inflation; (3) the total amount of pending revenue requests by major telephone companies at the end of 1985 declined substantially, indicating less pressure on state public utilities commissions to award increases in telephone rates in the near term; (4) FCC monitoring efforts lack necessary insight into whether telephone service changes are occurring in rural areas and on the impact of its regulations on rural areas; and (5) FCC did not routinely monitor increases in local residential telephone service rate increases that resulted from telephone companies' revenue increases.