Local Telephone Competition: A Brief Overview (CRS Report for Congress)
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| Release Date |
May 27, 2003 |
| Report Number |
RL31938 |
| Report Type |
Report |
| Authors |
Angele A. Gilroy, Resources, Science, and Industry Division |
| Source Agency |
Congressional Research Service |
Summary:
One of the central goals of the Telecommunications Act of 1996 (P. L. 104-104) is to promote
competition in the local(exchange) telephone market. The 1996 Act attempts to foster this
competition by, among other provisions, requiring that the local monopoly infrastructure be opened
up to competitors. The Federal Communications Commission (FCC) has been tasked with
implementing a series of rulemakings to achieve this goal. In the seven years since the Act's
passage, policy makers have continued to debate the extent to which this goal has been realized.
Although the local telephone market had experienced limited competitive entry in selected high
end urbanized business markets since the 1980's, the birth of local exchange competition can be
traced, to a large degree, to changes that have occurred since the implementation of the market
opening provisions contained in the 1996 Act. The major players involved in this transition are:
the incumbent local exchange carriers or ILECs, who control, but have been required to provide
access to, the legacy network; and a wide range of entities known as competitive local exchange
carriers, or CLECs, who, through these market opening provisions, have been encouraged to compete
with the ILECs for market share.
The ILECs, or established carriers, are composed of exchange carriers that are the historical
holders of the franchise to provide exchange service, local transport, and switching services within
a designated service territory. Those who compete with the incumbents, or CLECs, enter the
market in any one, or any combination, of three major ways: through resale of the ILEC's retail
services; through the use of unbundled network elements; or through the building of their own
facilities.
ILECs continue to dominate the local exchange market in terms of both revenue share (87.4
percent) and number of access lines (88.6 percent), but CLECs have been steadily making inroads.
The CLEC industry has, overall, experienced a steady increase, in both real and absolute terms, in
industry revenues and access line market share. Despite this overall increase, the level of
competition has entered markets, both in terms of service sector and geography, to varying degrees.
In general, high volume business markets have benefitted more from competitive entry as have more
densely populated markets. Competition in residential and small business markets and in geographic
markets outside of major metropolitan areas, while increasing, generally tends to be less robust.
ILECs continue to dominate in the residential market. The growth of competition has been uneven
with some individual markets experiencing high levels of competitive entry and others experiencing
next to none. In the seven years since the passage of the 1996 Telecommunications Act competition
has grown, but perhaps at a slower pace than some envisioned. The entrance of competition in the
local exchange market, however, continues to be a work in progress that remains subject to
economic, legal and regulatory forces.
This report will be updated as events warrant.
