By Michael H. Lee and William A. RosquistThe Vanishing LATA:
Pricing Chasms
and Clashing Markets
for Toll Service
Wide disparities can occur in toll rates within some states (em a legacy of multiple LATAs. Now, with
barriers falling, where will prices go?
When local access and transport areas (LATAs) were introduced a decade ago,1 separate geographic markets emerged for intra- and interLATA long-distance (toll) service. Montana, like many other states, has more than one LATA. Now, Congress has enacted legislation that allows regional Bell operating companies (RBOCs) to enter the interLATA market.2 The two LATA markets will converge; toll rates will change. A new long-distance price equilibrium will emerge, possibly at an unexpectedly low level.
How competitors in this new market will react to the presence of other competitors is as yet unknown. However, their revenues will be affected by converging toll-service rates. Market shares for toll and carrier access services will also be affected.
The Problem: Unsustainable Rate Disparities
The interLATA toll rates are similar for the major Montana interexchange carriers (IXCs) (em AT&T, Sprint, and MCI. However, these toll rates differ from the intraLATA toll rates charged by U S WEST Communications, Inc., sometimes significantly. Table 1 shows the disparities in residential message toll service (MTS) rates between U S WEST and AT&T. Significant differences exist in certain night/ weekend MTS mileage bands, such as the 11 to 16 mile band, where AT&T's rate exceeds U S WEST's by 233 percent.