The New York Public Service Commission (PSC) has decided to review its experimental "Open Market Plan" to introduce competition to the local telephone market in the Rochester, NY area. The action was based largely on a complaint by AT&T Communications of New York, Inc., alleging that prices for wholesale services provided by Rochester Telephone Corp, the incumbent local exchange carrier (LEC), impeded the development of the resale market in the area.
AT&T argued that the 5-percent wholesale discount approved by the PSC as part of its open-market experiment was inadequate. According to AT&T, the minimum discount that would permit resellers to break even was 35 percent. It added that an existing cap on minutes of flat rate residential service available to resellers imposed a barrier on market entry, as did the reluctance of the LEC to readily transfer information on existing customer service features.
The PSC agreed with AT&T that the "competition framework" in the Rochester market was not working as expected. Nevertheless, it turned aside a claim by Time Warner AxS of Rochester, L.P., a new market entrant, that the PSC should apply extra caution in promoting resale opportunities in the LEC market.
The PSC concluded that the appropriate wholesale/retail rate differential appeared "crucial" to the success of resale service and competition generally in the Rochester area. To the PSC, Time Warner occupied a unique position: It was planning to use its existing cable television network and customer base to provide LEC telephone services. Moreover, a number of other potential competitors had also made it clear they intended first to develop a customer base via resale service, before investing, if at all, in wire facilities.
The PSC said it would reconsider the existing
5-percent wholesale discount, as well as the flat-rate cap. It also directed Rochester Telephone to explain why customers should not enjoy the option of transferring intact their existing package of services when switching to a reseller. Re Rochester Tel. Corp., Case 93-C-0103, Feb. 2, 1996 (N.Y.P.S.C.)
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