FCC Uses Its Power to Stimulate Competition in the Telecommunications

question 83

Essay

FCC Uses Its Power to Stimulate Competition in the Telecommunications Market

Oh, So Many Hurdles

Having received approval from the Justice Department and the Federal Trade Commission, Ameritech and SBC Communications received permission from the Federal Communications Commission to combine to form the nation’s largest local telephone company. The FCC gave its approval of the $74 billion transaction, subject to conditions requiring that the companies open their markets to rivals and enter new markets to compete with established local phone companies.

Satisfying the FCC’s Concerns

SBC, which operates under Southwestern Bell, Pacific Bell, SNET, Nevada Bell, and Cellular One brands, has 52 million phone lines in its territory. It also has 8.3 million wireless customers across the United States. Ameritech, which serves Illinois, Indiana, Michigan, Ohio, and Wisconsin, has more than 12 million phone customers. It also provides wireless service to 3.2 million individuals and businesses.

The combined business would control 57 million, or one-third, of the nation’s local phone lines in 13 states. The FCC adopted 30 conditions to ensure that the deal would serve the public interest. The new SBC must enter 30 new markets within 30 months to compete with established local phone companies. In the new markets, it would face fierce competition from Bell Atlantic, BellSouth, and U.S. West. The company is required to provide deep discounts on key pieces of their networks to rivals who want to lease them. The merged companies also must establish a separate subsidiary to provide advanced telecommunications services such as high-speed Internet access. At least 10% of its upgraded services would go toward low-income groups. Failure to satisfy these conditions would result in stiff fines. The companies could face $1.2 billion in penalties for failing to meet the new market deadline and could pay another $1.1 billion for not meeting performance standards related to opening up their markets.

A Costly Remedy for SBC

SBC has had considerable difficulty in complying with its agreement with the FCC. Between December 2000 and July 2001, SBC paid the U.S. government $38.5 million for failing to provide adequately rivals with access to its network. The government noted that SBC failed repeatedly to make available its network in a timely manner, to meet installation deadlines, and to notify competitors when their orders were filled.
-Comment on the fairness and effectiveness of using the imposition of heavy fines to promote social policy.

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Definitions:

Future Services

The future work or duties to be performed under the terms of a service contract or agreement.

Extreme Uncertainty

Situations where the variables and risks affecting an outcome cannot be measured or predicted accurately due to insufficient information or understanding.

Cash Collected

This term generally refers to the amount of money a company receives during a specific period, including revenues from sales and other sources.

Immediate Saleable

Assets or securities that can be quickly and easily sold in the market without significantly affecting their price.