Summary: Regulated telecommunications services include basic interstate telephone service, while unregulated services encompass such technologies as voice mail and electronic mail that transmit information over telephone lines. If carriers' costs for these two types of services are not properly allocated, customers of regulated telephone services may end up paying for some of the costs of the unregulated services--a practice known as cross-subsidization. GAO reported in 1987 (GAO/RCED-88-34) that the Federal Communications Commission (FCC) had not assigned enough staff to monitor carriers' cost allocations to protect ratepayers from cross-subsidization. This report reviews FCC's implementation of (1) GAO's recommendation to boost on-site audits of carriers' cost allocations and (2) certain accounting safeguards established after 1987 to protect ratepayers from cross-subsidization, including audits of carriers' cost allocations done from the carriers by certified public accounting firms, FCC's reviews of these audits, and a computerized system for maintaining carriers' cost and revenue data.
