FCC Record, Volume 2, No. 3, Pages 643 to 942, February 2 - February 13, 1987 Page: 659
ii, 643-942, v p. ; 28 cm.View a full description of this book.
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Federal Communications Commission Record
Third. market rules could be established. Under this
approach carriers would be given greater pricing flexibility
but resale, tariff notice, tariff duration and nondiscrimination
requirements would discourage both
predatory and monopoly pricing by the dominant firm.
In general terms. the market rules approach would require
dominant carriers to tariff services over which they
exercise market power. Such tariffs would permit unlimited
resale, contain no discriminatory terms or conditions,
go into effect only after a 45-90 day notice period, and
remain in effect for a substantial minimum period
(perhaps 1-2 years). Taken together. these requirements
would act to discourage the dominant carrier from pricing
above or below cost. Additionally. these requirements
would lessen the dominant carrier's ability to manipulate
the migration of customers from one service (or service
provider) to another service (or service provider). Fourth.
a social contract approach could be implemented. Not
dissimilar to but probably less refined than the price cap
proposal. this methodology,. would freeze prices and then
permit price adjustments based on an index such as the
CPI. Fifth, a marketbasket approach could be implemented.
This approach would only look at the overall
stock market performance of a utility. If the stock outperformed
a marketbasket of comparable firms. then, rates
would be lowered. If the stock underperformed. then
rates would be raised. 5
A matrix can thus be constructed which depicts both
the dominant/nondominant analyses options as well as the
regulatory alternatives for determining the rates of dominant
carriers/services.Economic
Regulation
of Dominant
Carriers
OptionsDominant/Nondominant Screen Options
('ore' Carrier Service Service
Non-core Specific Specific b.
Competit
Competiti-Service
ive ve
Carrier Carrier
( 1 (SubmarkMarket)
ets)
Rate of B
Return A
(84-800)
Price
Caps
Market
Rules
Social
Contract
MarketbasketWhere we are today is marked above as A. Where this
NPRM proposes we go is marked above as B. Where we
probably need to be in order to maximize consumer
benefits is neither A nor B since both employ traditional
rate of return regulation and thus incorporate the significant
negatives of that approach. More specifically, looking
at the horizontal columns. I continue to believe that
consumer welfare may be maximized through a market
rules' approach. particularly when that approach is combined
with the price cap and social contract proposals.
Price caps could easily be grafted onto the market rules
approach to more fully protect against monopoly prices
and provide additional incentives to carriers to operate
efficiently. A social contract could also be included toencourage productivity and to ensure that the benefits of
increases in productivity as well as cost decreases are
shared fairly by both ratepayers and shareholders.
Looking at the vertical columns, it appears that any
approach which permits us to rationally identify services.
carriers, or the particular services of certain carriers that
need not be fully regulated under Title II would be
acceptable. As stated above, I'm not yet convinced that
the approach favored in this NPRM will produce that
result. However, I do applaud the item for asking the
right questions and for being so open in soliciting different
analytical frameworks, including core/non-core.
I present this matrix and short analysis in order to
generate discussion and to focus attention on issues that I
believe are cost relevant and timely. We need to consider
alternatives for screening dominant/nondominant
carriers/services as well as alternatives to our present
economic regulation of dominant carriers. I must emphasize
that while we may look at these issues independently.
I believe that the public interest would be best
served by considering and analyzing these issues in an
integrated fashion. I support reveiwing the issues raised by
this well crafted NPRM and I look forward to reviewing
the comments filed in this proceeding.
FOOTNOTES TO COMMISSIONER
DAWSON'S STATEMENT
1 We have previously lessened our regulation of basic services
provided by non-dominant carriers, deregulated all enhanced
services and granted pricing flexibility to dominant carriers for
certain services.
2 The NPRM also recognizes in footnote 49 that the traditional
market/submarket analysis is ordinarily employed to uncover
a niche (submarket) in which an otherwise nondominant
provider has market power that could be exercised without
detection in a broader market analysis. The item proposes the
opposite use: to define a submarket in order to find no market
power for an otherwise dominant provider. It may be that this
atypical use of the Conpctitive Carrier methodology will raise
issues which we cannot now foresee but which could have been
avoided under a different analysis.
3 Of course other issues would have to be addressed, including
identifying the core services through substitutability analyses.
4 I have previously pointed out the deficiencies of
rate-of-return regulation and have called for the analysis of
other options, including market rules. See 1983 Separate Statements
of Commissioner Mimi Weyforth Dawson in CC Dockets
79-245 and 83-1147.
5 A marketbasket approach may give the dominant carrier too
much flexibility in setting individual service rates. Additionally,
stock performance will increasingly be impacted by nonregulated
activities as carriers increasingly diversify. It would be
unfair to make ratepayers "pay" for the failures of the nonregulated
businesses. Similarly, it would unfair for shareholders
to "support" the regulated activities if the non-regulated
businesses boomed. Further, selecting the comparable firms to
be phased in the marketbasket would not be an easy task. Also,
this approach may do very little to promote efficiency or
innovation. While this approach may somehow serve as a check
on rates and rate of return. I do not find it to be particularly
useful model for overseeing the rates of a dominant carrier for
services over which it exercises market power.
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United States. Federal Communications Commission. FCC Record, Volume 2, No. 3, Pages 643 to 942, February 2 - February 13, 1987, book, February 1987; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc1608/m1/21/: accessed April 25, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.