Finding the state's long-distance telecommunications market sufficiently competitive, the New York Public Service Commission (PSC) has relaxed price controls for AT&T Communications of New York, Inc., an interexchange carrier (IXC) currently regulated as a dominant provider of long-distance services. Under the settlement agreement, AT&T will freeze price floors and ceilings for basic long-distance service (message toll service, or "MTS") for five years and give customers a one-time rate reduction to reflect lower access charges AT&T must pay to local exchange carriers in the state. In return, the settlement exempts AT&T from rate-of-return regulation and removes an annual limit on MTS rate increases. To protect basic service ratepayers from large and abrupt price increases, the PSC directed the carrier to file an optional calling plan for low-volume users.
In approving the new rate plan, the PSC found that AT&T's market share had declined and that the carrier had priced services as if it faced significant market pressure. The PSC noted that the carrier's intrastate operating results "might well have led the company to raise rates had it thought the market allowed it to do so." In addition, the PSC noted, AT&T had reduced rates by amounts exceeding the decline in its access costs over the same time period, another indication of significant price pressure from intrastate competitors. Re AT&T Communications of New York, Inc., Case 94-C-0017, Opinion No. 96-7, Mar. 7, 1996 (N.Y.P.S.C.).
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