Discussion Papers

Prof. Dr. Ingo Vogelsang

Theorie und Praxis des Resale-Prinzips in der amerikanischen Telekommunikationsregulierung
Nr. 231 / Januar 2002

Summary

Resale has been an established feature of US telecommunications regulation and competition for over 25 years. Its initial regulatory basis was provided by the principles of just and reasonable tariffs and nondiscrimination against customer groups, in this case against resellers. From these principles followed the ability of resellers to finance themselves out of quantity discounts. Since AT&T’s competitors initially had only partial network coverage, the FCC’s original resale order was indispensable for the growth of nationwide competition in the US long-distance sector. After the other long-distance carriers owned full-coverage networks, a second wave of resale eme ged and continues, this time based on excess capacity in the networks.

In the Telecommunications Act of 1996 (1996 Act) resale is an equal partner in a threepart strategy for local competition, the other partners being fully owned networks and completion of networks through unbundled network elements (such as unbundled local loops). The 1996 Act extended the resale obligation to all services of local telephone companies and prescribed wholesale discounts for the end user services of incumbent local exchange companies (ILECs). Since local services are often subsidized and contain no quantity discounts, wholesale discounts were a necessary condition for local resale. The new obligations therefore extend to non cost-covering services, special customer contracts and bundled services.

Because of the resistance of ILECs and the complexity of local resale the resale provisions of the 1996 Act would have been hard to implement without the possibility provided by the Act to reward the Regional Bell Operating Companies with long-distance entry if they promote local competition. This incentive was instrumental in a number of states in enabling resellers to gain direct electronic access to the operations support systems of ILECs, including information, provisioning and repairs.

The regulatory approach to resale rests on the common carrier principle, which stipulates nondiscriminatory resale of services, and on incumbency of loal exchange carriers who have to offer their end-user services for resale with wholesale rebates.

The lessons from the US resale provisions and experience include, in particular, that resale is part of balanced infrastructure and service competition, that legal resale provisions are necessary to achieve this and that resale is needed for initiating infrastructure competition but also that its useful functions extend to the long run. [only a german version available]

Diskussion Paper is available for download.

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