Government agencies and businesses that require significant capacity to meet voice and data needs depend on dedicated access services. This segment of the telecommunications market generated about $16 billion in revenues for the major incumbent telecommunications firms in 2005. The Federal Communications Commission (FCC) has historically regulated dedicated access prices. With the Telecommunications Act of 1996, FCC reformed its rules to rely on competition to bring about cost-based pricing. Starting in 2001, FCC granted pricing flexibility on the basis of a proxy measure of competition. GAO examined (1) the extent that alternatives are available in areas where FCC granted pricing flexibility, (2) how prices have changed since the granting of pricing flexibility, and the effect on government agencies, and (3) how FCC monitors competition. GAO's work included analyzing data on competitive alternatives, list prices, and average revenue, and interviewing FCC officials and industry representatives.
Recommendations for Executive Action
|Federal Communications Commission||To more effectively monitor and determine whether its deregulatory actions are achieving their goals of encouraging competition, and ensuring lower prices and adequate consumer choice, FCC should develop a meaningful and workable definition of effective competition, or true customer choice, using an approach that evaluates the competitive nature of a market by accounting for the number of effective competitive choices available to customers.|
|Federal Communications Commission||To more effectively monitor and determine whether its deregulatory actions are achieving their goals of encouraging competition, and ensuring lower prices and adequate consumer choice, FCC should consider collecting additional data and developing additional measures to monitor competition on an ongoing basis that more accurately represents market developments and individual customer choice (e.g., price indices and the extent of competitors' networks). If, through this monitoring, FCC finds that competition is not developing as it expected, it should determine what actions are necessary to accelerate competition for dedicated access.|