Telephone Communications:

Controlling Cross-Subsidy Between Regulated and Competitive Services

RCED-88-34: Published: Oct 23, 1987. Publicly Released: Nov 10, 1987.


John M. Ols, Jr
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In response to a congressional request, GAO evaluated the Federal Communication Commission's (FCC) proposed implementation of accounting controls to prevent cross-subsidization between regulated and nonregulated telephone service in order to facilitate competition among telephone companies.

GAO found that: (1) the FCC allocation process was inefficient because it impeded companies from offering new services and imposed costs on the public; (2) the new process of cost allocation procedures and manuals, and an annual independent audit of the companies' cost allocation manuals, should ensure compliance; and (3) FCC believes that there is a need to further regulate the telephone companies in order to prevent cross-subsidizing of nonregulated services with regulated services and discrimination against competitors.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendation for Executive Action

    Recommendation: The Chairman, FCC, should develop a strategy for providing greater levels of oversight and assurance that carriers are properly implementing its cost allocation procedures.

    Agency Affected: Federal Communications Commission

    Status: Closed - Not Implemented

    Comments: Since GAO has a followup job underway examining FCC actions taken, GAO no longer needs to formally track this recommendation.

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