The U.S. Federal Communications Commission (FCC) has since 1991 used price caps to regulate jurisdictionally interstate rates of large, incumbent telephone local-exchange companies (ILECs). Since 1994, the amount of revenue subject to this price-cap regulation has fallen an estimated 19%. Reductions in per-minute rates associated with originating and terminating interstate traffic have decreased price-cap revenue. The falling number of ILEC switched access lines since the early 2000’s also has reduced price-cap revenue. In addition, grants of petitions to remove revenue from price caps have lessened price-cap regulated revenue.
Major trends under FCC price-cap regulation have been a reduction in per-minute telephone access rates and an increase in flat rates. An broad aggregate of per-minute access rates has fallen 90% since 1994. End-user common line charges (EUCLs), also called subscriber line charges (SLCs), are FCC-regulated flat monthly fees on local telephone bills. A large share of EUCLs for primary residential and single-line business lines show an an aggregate increase of 66% since 1994. Most costs of telephone service are not traffic-sensitive. Hence a shift in revenue weight from per-minute rates to flat rates makes economic sense.
FCC price-cap regulation is quite intricate. While EUCLs are set at specific levels through the regulatory process, they are also included in price caps. EUCL revenue has risen from 30% of total price cap revenue in 1994 to 50% in 2009. Thus the FCC retains direct control over prices accounting for about 50% of the revenue subject to price caps. FCC price caps also include some complicated rate-of-return provisions known as revenue sharing and low-end adjustments. Academic models of price caps provide little insight into FCC price caps in actual operation.
To foster better understanding of FCC price caps in actual operation and of local U.S. telephone access rates, I’ve put together a large dataset of price-cap telephone companies’ demand, rates, and revenues. An archive of all Tariff Review Plans for all price-cap telephone companies, 1992-2009, is also publicly available. Please analyze, extend, and improve these data, and share the results of your work publicly.
Note: Here are the online summary data of U.S. interstate voice access revenue, rates, and demand (Excel version).