Local Competition

1
Local Competition
2
3 Ways for new entrants in local competition

• resale,
• Unbundled Network Elements (UNEs), and
• facilities based competition.

3
Rate Rebalancing at the state level

• Bring each services price in line with costs and
  eliminate subsidies.
• lowered business rates,
• raised residential rates and
• eliminated flat rate service.
• done over time to avoid rate shock.

4
Interconnection Pricing and Entry

• Interconnection is mandated by the Telecom Act of
  96
• What price do the carriers charge each other for
  terminating traffic on each others network?
• Arbitrage

5
Interconnection Pricing and Entry

• If price is less, there is an incentive to use
  arbitrage and terminate LD traffic as local.
• With high term. rate, there is an incentive to
  connect users with large terminating traffic like
  ISPs.

6
Resale versus Facilities-based pricing

• Under Resale, the incumbent provides all the
  physical service and it is re-branded and billed
  by the competitor. Interim Wholesale Rate is
  17-25 discount off retail rate.
• If entry through new facilities is not
  economically possible, why have entry?
• If it is an interim solution, it needs to be
  priced right.

7
What are Market Shares now?
8
CLEC Market Share over time
9
ILEC Market Share over Time
10
Pricing of Different Options

• ATT/MCI have said that Resale is not profitable
• Facilities-Based - switch can take 6 months to 2
  years to install
• Progression
• Start with Resale to get enough customers
• Install a switch and use local loops
• Total facilities for large customers

11
What are prices of each option?
12
Percent Resale versus UNE versus Facilities
13
Unbundling of Network under Telecom Act of 1996

• Loop, Local Switching, Tandem Switch, Interoffice
  Transmission facilities, Signaling Systems and
  Databases.
• Local loop proxies - 9.83 (Mass.) To 25.36 for
  North Dakota. ATT wanted subloop - feeder,
  distribution and FDI (feeder distribution
  interface.)

14
Unbundling of Network under Telecom Act of 1996

• Local Switching - including custom calling,
  CLASS, and Centrex. (LECs wanted these
  classified as retail only)
• Tandem Switch
• Interoffice Transmission Facilities
• Signaling Systems and databases

15
Unbundling of network under Telecom Act of 1996

• SS7 - Signal Transfer Point (STP) - high capacity
  packet Switch
• SCP - service control points

16
Pricing for unbundling

• TELRIC. Total element long-run incremental
  cost.