Regulatory Issues and Market Structure


Despite the growth in competition in the telecommunications market, many consumers face limited choices. The more competitive offerings often target high-spending consumers who buy bundled services. Many people with fixed incomes rely on stand-alone basic service. For this service, competition is virtually non-existent. This is because basic services produce the lowest profit margins for providers. The largest telecommunications carriers have been required to provide basic landline to all parts of their service area. However, they are attempting to be released from this obligation.  These carriers are urging state regulators to release them from many of their responsibilities and requirements as public utilities, including the obligation to provide basic stand-alone landline service to all parts of their territory (referred to as the carrier of last resort requirement).



Ensuring universal access to essential telecommunications services

Policymakers should ensure that all consumers have access to essential telecommunications services in their residences. This service should be affordable, reliable, and high-quality. It should be available to consumers regardless of where they live.

Policymakers should ensure that all households have access to basic local phone service from a carrier of last resort (COLR) and that any designated COLR retains these traditional and vital responsibilities until another carrier or carriers are designated as the COLR. If legislation or rulemaking relieves any incumbent local-exchange carrier or successor service provider of COLR obligation, measures should be adopted to mitigate consumer harm.

Policymakers should preserve consumer protections for all telecommunications services. (see also Consumer Protections, Service Quality, and Reliability section of this chapter). These consumer protections should apply regardless of the platform technology used to deliver the service. This is necessary to ensure that all consumers have a choice of options that provide a minimum level of high-quality and affordable service.

Safeguarding minimum service and consumer choice in telecommunications

All consumers should be able to subscribe to stand-alone basic telephone service with affordable rates and consumer protections. Providers should be prohibited from requiring subscribers to purchase one service (such as broadband internet access) in order to obtain another (such as local telephone service). Rates should be just, reasonable, and affordable. Consumers should be able to obtain this service without a contract and unfair early termination penalties.

Ensuring effective competition among telecommunications services providers

Where policymakers relax or remove laws and regulations, they should ensure true and effective competition to the fullest extent possible, including:

  • clear consumer benefits, including lower prices and better-quality service;
  • appropriate consumer protections to address ineffective or insufficient competition; and
  • rigorous regulatory action and oversight to maintain and enhance competition.

Federal and state policymakers should first establish clear standards for effective competition that include at a minimum:

  • a range of accessible, comparable, and useful consumer options at just, reasonable, and affordable rates;
  • just and reasonable distribution of the benefits of competition across all residential consumer groups, including consumers with low incomes and rural consumers;
  • low switching barriers, to ensure consumers are unimpeded in their ability to change service providers; and
  • clear, reliable, and meaningful price and service-quality information that is easily accessible and comparable across providers.

Policymakers should monitor service-provider performance and vigorously enforce promised sanctions if performance falls short of the standards for effective competition.

  • Policymakers should monitor the development of competition and introduce strict regulatory controls—or reconsider any regulatory flexibility they granted on the premise that competition was emerging—if promises or predictions regarding effective competition, prices, service quality, reliability, and overall consumer protections are not realized.
  • Consumers should be protected from bearing the cost and risk of telecommunications carriers’ entry into new markets.
  • Regulatory agencies should have the authority and resources to monitor competitive conditions and require remedial actions across all communications providers and technology platforms.

Consumer Choice in Multifamily Dwelling Units

The Federal Communications Commission (FCC) has banned exclusive provider contracts in multifamily dwelling units (MDUs), such as apartment complexes, condominiums, and housing cooperatives. In practice, residential tenants have limited utility and landline telecommunications choices. Typically, the homeowners association or the landlord contracts with one provider to serve the entire MDU, but it cannot prohibit tenants from using alternative telecommunications providers. Some landlords have found loopholes, such as refusing to allow access to alternative providers.

Choosing providers Federal and state policymakers should ensure that all occupants of MDUs have access to the energy and telecommunications providers of their choice.