GAO report finds little competition

[TetsuoShima]

Although the FCC insists that its deregulation of the market for phone and broadband services has lowered prices and increased competition, the GAO found that wasn't quite true. In fact, areas where the FCC has granted the most deregulation often have higher list prices for network access than areas still subject to price controls.

 

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Phase II was only granted in markets with the most competition, on the theory that this would bring prices down without the need for government regulation. In practice, though, it didn't happen. The GAO report notes that "prices and average revenues are higher, on average, in phase II" regions, in part because incumbent providers generally lease their lines at a rate equal to or lower than the cost of building a new network. The result is not surprising; other companies decide to lease lines rather than build competing networks.

 

But that's not all; in addition to higher prices, there is actually less competition. "The data also show that the theoretically more competitive phase II areas generally have lower percentage of lit buildings than phase I areas, indicating that FCC's competitive triggers may not accurately predict competition at the building level," the report says.

 

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Regardless of the reasons for the current situation, the report makes a compelling case that the expected competition has not materialized. In the businesses surveyed for the report, GAO researchers found that buildings with the heaviest demand for dedicated services had a 25 percent chance of having at least two options for access—and this was the high point. Many other office buildings had only a six percent chance of having competition.

 

http://arstechnica.com/news.ars/post/20061204-8346.html

 

So far for theoretical free market (and usually expected increased competion and lower prices) in todays big corps market structure...