Telephone Communications:

Issues Affecting Rural Telephone Service

RCED-87-74: Published: Mar 17, 1987. Publicly Released: Mar 30, 1987.

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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 to rural areas; and (2) the key issues and problems facing rural telephone companies and subscribers.

GAO found that, although FCC issued regulatory decisions designed to price telephone service more competitively, major rural telephone issues concerned whether: (1) local rates would increase due to shifts of certain costs from long-distance to local service; (2) long-distance rates would increase in rural areas if costs were no longer averaged; (3) subscribers would benefit from the competition of long-distance companies; and (4) technological improvements would lower the costs of telephone service. These issues have not significantly affected the small telephone companies that GAO studied. Through 1985, the companies were financially healthy and less concerned with their present situation than with future developments. FCC recognized the special needs of rural telephone subscribers and for universal telephone service at affordable rates. GAO believes that FCC needs to improve its federal and state monitoring of small rural telephone companies to ensure that federal and state regulatory decisions do not have unintended consequences.

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