Based on data filed by the Ad Hoc Telecommunications Users Committee, tariff rates in 2009 for DS1 and DS3 special-access circuit elements across U.S. states have a spread equal to about plus and minus a third of the average. Rates differ across bandwidth (DS1 or DS3), regulatory type (price cap or pricing flexibility), purchasing term commitment (in months from 1 to 60), and geographic zone (typically three zones). Differences across states within these rate structures reflect other factors that affect tariff rates.
Rate differences across states are not highly correlated with state characteristics. Qwest, for example, has the same DS1 and DS3 rates across its 14-state service territory. AT&T and Verizon, in contrast, have tariffs that differ across state groups in ways that relate to the service territories of historic telephone operating companies.
Consider the highest and lowest DS1, price-cap, month-to-month, zone 1 rates as measured by the composite 10-mile circuit rate. The highest such rate is $1023 in Indiana and Wisconsin (AT&T). The lowest such rate is $395 across the whole 14-state Qwest service territory, which includes Minnesota and Iowa. Differences in regulation, competition, service cost, or unmeasured differences in tariff structures could explain this dispersion. What specifically explains the actual difference isn’t obvious.
Differences between price-cap and pricing-flexibility rates also show considerable ambiguity. Telephone companies are granted petitions for pricing flexibility based on criteria that the FCC established to measure the development of competition.[*] The rate data indicate that pricing flexibility rates are consistently higher than price-cap rates. Higher prices typically aren’t associated with greater competition. However, for most service attribute types, pricing flexibility rates have less dispersion across states than do price-cap rates. That is consistent with more competition in circumstances in which unpriced differences across states matter little.
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[*] An FCC order, adopted on Aug. 5, 1999, set out a procedure (“pricing flexibility” petitions) for removing rate elements from existing price-cap regulation. BellSouth provides an example of the regulatory procedure. On Dec. 15, 2000, the FCC’s Common Carrier Bureau granted a BellSouth petition for pricing flexibility. The order granting that petition apparently isn’t online, but an affirming review of that order, which includes a list of the metropolitican statistical areas (MSAs) to which it applies, is online. Here’s a better formated version of the MSA list. On Nov. 22, 2002, the Bureau adopted an order granting another BellSouth petition for pricing flexibility. On May 16,2008, the Bureau granted a third BellSouth petition for pricing flexibility.