Issues Related to Local Telephone Service

RCED-00-237: Published: Aug 31, 2000. Publicly Released: Aug 31, 2000.

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Stanley J. Czerwinski
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Pursuant to a congressional request, GAO provided information on developments in the local telephone service market, focusing on the: (1) number of rural access lines that have been sold since the Telecommunications Act's passage by large incumbent local exchange carriers (ILEC); (2) development of digital subscriber line (DSL) technology and the basis for variations in its rate of deployment; and (3) quality of local telephone service, as indicated by customer complaints and customer survey data reported to the Federal Communications Commission (FCC) by the major ILECs.

GAO noted that: (1) of the nearly 832,000 access lines sold by major ILECs from January 1996 through April 2000, an estimated 68 percent were in rural areas, according to state utility commission officials; (2) the estimated 562,000 rural access lines sold represented only 2 percent of the major ILECs' total rural access lines in 1999; (3) after a steady annual decline in sales of access lines from 1997 through 1999, the first 4 months of 2000 saw a dramatic increase in sales, particularly in rural areas; (4) in fact, the number of rural access lines sold from January through April 2000 already exceeds the total number of rural lines sold during the previous 4 years; (5) the sharp increase in rural sales appears to be continuing; (6) GTE and US WEST have sales pending with state utility commissions or FCC involving a total of over 870,000 additional rural access lines; (7) according to GTE and US WEST officials, their companies made business decisions to sell access lines at several times in the past; (8) FCC, on the other hand, believes that most of the delay is the result of the negotiation process between the ILEC and potential purchasers, rather than the state and federal approval processes; (9) DSL technology was initially developed in the late 1980s and tested in the early 1990s as a means for providing video services over the telephone network; (10) in the mid-1990s, as the Internet began to surge in popularity, technical trials were conducted by several telephone companies to assess the feasibility of using the asymmetric form of DSL (ADSL) for high-speed Internet access; (11) although the commercial availability of ADSL did not begin for nearly 10 years after its development, telephone companies have rapidly deployed DSL over the past 3 years; (12) ILECs intensified their ADSL deployment in response to both the ADSL deployment by competitive local exchange carriers, and the cable industry's foray into Internet access with cable modem service; (13) a number of communications industry officials and some industry experts told GAO that ADSL deployment did not occur sooner because the ILECs were concerned about potential harm to revenues generated by other existing high-speed telephone services, and because of the unproven nature of the technology; and (14) several ILEC officials told GAO that ADSL was not deployed sooner because trials of ADSL for delivery of video services had been unsuccessful, the technology had various technical limitations, and federal regulations that had been issued for ADSL lines serve as a disincentive to its more rapid deployment.

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