State regulators continue to update methods of pricing telecommunications services, using price caps for local exchange carriers (LECs) while expanding existing pricing flexibility for interexchange carriers (IXCs). The emerging trend toward inviting competitors to serve the local market, including basic local exchange service, also continues. Some of the activity mirrors ongoing developments at the federal level, such as major regulatory reforms under debate in the Congress and court-supervised modifications to existing service restrictions stemming from the AT&T divestiture.
Somes states, like Alabama, have launched a full program of regulatory reform with pure price-cap regulation for all local carriers and a newly announced opening of the local exchange market to full competition. Other states, like Iowa, are straightening out the details of the price-cap trend as LECs test the limits of pricing flexibility and the meaning of price cap promises under existing regulatory reform plans.
The parallel nature of reforms at the state and national levels is evident in a recent decision by the California Public Utilities Commission (CPUC) directing Pacific Bell, an LEC, to seek a federal court waiver of the restrictions on full provision of interexchange services by LECs.
Noting its goal of opening all telephone markets to competition by 1997, the CPUC blamed the restrictions imposed by the federal courts as a part of the AT&T divestiture for preventing local service reforms from reaching the interLATA toll calling market. Regulatory reforms are further restricted by a requirement under state law that local competition must precede or accompany the opening of the inter-LATA market, the CPUC explained. Re Alternative