OECD: More needed in US telecom competition

Telecommunication regulators in the US need to do more to ensure uniformity in pricing of unbundled services, and substantially increase penalties to providers for refusing to offer such services to competitive local exchange carriers and others.

          Telecommunication regulators in the US need to do more to ensure uniformity in pricing of unbundled services, and substantially increase penalties to providers for refusing to offer such services to competitive local exchange carriers (CLECs) and others, the Organisation for Economic Cooperation and Development (OECD) said in its annual Economic Survey of the US.

          Regulations require dominant carriers to open their network to competitors, so-called unbundling, to increase competition and choice for corporations and consumers. At present, however, the price levied by the dominant carrier on the competitor is determined by the operator itself. Such an arrangement gives dominant carriers the ability to pad their charges to such a level that competitors find it uneconomical to enter a given market, said the OECD.

          "There is considerable diversity in pricing of unbundled elements across states that needs to be ended, while finding a different lever on the local companies to ensure they do sell unbundled elements other than preventing them from entering other markets such as data transmission," said the survey.

          "In particular, once arguments about the appropriateness of unbundled prices have been settled, the penalties for refusal to sell unbundled elements should be raised very substantially, perhaps bringing them more into line with those imposed for anti-competitive actions in other parts of the economy," it added.

          However, while calling for clearer rules on pricing and higher penalties, the OECD did note a marked increase in competition in local telecommunication services in the US in 2000. The survey said CLEC-provided lines grew to 8.5% of all lines at the end of 2000, which represents the fastest rate of penetration experienced in any OECD country.

          The activity of CLECs in heavily populated areas, and New York state in particular, was high, the survey highlighted. In New York CLECs enjoy a 20% market share thanks to the existence of competition in many areas. At the end of the year, 88% of state residents lived in areas served by at least one CLEC, and more than half of all households lived in areas where there were four or more.

          Outside of heavily populated areas the situation was not as bright. Almost half of all areas in the US had no competition in the local market. The situation is unlikely to get better unless states shake up their regulatory regimes, the survey said.

          It applauded new regulations that require dominant carriers to allow competitors to place their switching and routing equipment in the same building as the local operator.

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