Path: utzoo!utgpu!jarvis.csri.toronto.edu!cs.utexas.edu!mailrus!accuvax.nwu.edu!nucsrl!telecom-request
From: nvuxr!deej@bellcore.bellcore.com (David Lewis)
Newsgroups: comp.dcom.telecom
Subject: Re: Subsidizing One Product With Revenues From Another is Common
Message-ID: <4743@accuvax.nwu.edu>
Date: 4 Mar 90 17:10:28 GMT
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In article <4618@accuvax.nwu.edu>, gnu@toad.com (John Gilmore) writes:

> dam@mtqua.att.com (Daniel A Margolis) wrote:

> > It does not matter whether the company accused of dumping has designed
> > a product specifically for the US.  What does matter is that they have
> > been found to be subsidizing their US products with their Japanese
> > profits.

> Isn't this what AT&T did for years -- subsidize local access with long
> distance revenues?  Why is it good when the FCC orders AT&T to do it
> and bad when a company (that happens to be from Japan) does it?

> [Moderator's Note: The flaw in your analogy between AT&T/Bell System
> subsidies to local service from long distance revenues and the
> Japanese thing is that AT&T started doing it at a time when we were
> striving for universal service -- phones in each household, etc.
> Keeping the price of local service artificially low at the expense of
> long distance revenues was one way to help spur universal service.]

If promotion of universal service were the only reason for the
FCC-mandated cross-subsidy between local and long distance, you might
have a point.  But guess what -- universal service has been achieved,
and we still have a cross-subsidy between local and long distance.
Except now, instead of just being a bookkeeping move by AT&T, it's
actual money changing hands from ICs to LECs.

The fact of the matter is that the government is still promoting the
long-distance subsidy of local usage.  The reason is no longer to spur
universal service; instead, it's a "public interest" issue -- the
public is viewed, in a lot of places, as having a "right" to
inexpensive local phone service.  So we levy an access charge, we sock
the ICs for exchange access, and we subsidize local service.

Of course, time passes, technology advances, and the market will have
its way sooner or later.  There will always be users who cost less to
provide service to, and users who cost more to provide service to, and
entrepeneurs who discover that they can undercut the government-approved 
price in some areas and take the monopoly to the cleaners.

Established interests call it "cream-skimming"; others would call it
"the free market".  Just ask NYTel how they're doing in the financial
district in Manhattan.


David G Lewis					...!bellcore!nvuxr!deej
            (@ Bellcore Navesink Research & Engineering Center)
              "If this is paradise, I wish I had a lawnmower."