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Wednesday, May 02, 2012

Lowest corresponding compliance

Now here is something that surfaces every now and then, but I've never blogged about: "lowest corresponding price."  According to FCC regulations, "Providers of eligible services shall not charge schools, school districts, libraries, library consortia, or consortia including any of these entities a price above the lowest corresponding price for supported services...." (47 C.F.R. § 54.511(b))  "Lowest corresponding price" is defined as "the lowest price that a service provider charges to non-residential customers who are similarly situated to a particular school, library, or library consortium for similar services." (47 C.F.R. § 54.500(f))

Every now and then I wonder whatever happened to that rule, most recently when the FCC requested comments on a petition by some telecom lobbying groups for "clarification" (read "limitation") of the rule.

Yesterday, Pro Publica published an article on the FCC's neglect of the rule.  It's a good read.  The article points out that while the FCC has done diddly to ensure compliance with this rule, which I knew, some lawsuits are pending, and the Justice Department reached a settlement with AT&T in Indiana over its failure to give schools and libraries the lowest corresponding price.

I always thought that the rule was worthless, since telecom pricing is like mattresses: you can't comparison shop because the manufacturers purposely create a myriad of products that are very similar, but different in unimportant ways.  Add to that volume discounts, and it's really hard to pin down a "corresponding price."  But if the Justice Department was able to get $8.3 million and a compliance agreement out of AT&T, maybe I should pay attention to the rule.

Hey, is this a way to get rid of the 470?  If the free market works the way the economics textbooks claim, vendors should generally be charging the same price, and it should be the lowest price possible to cover marginal production costs.  So if a vendor is forced to give their best price, that should be the best price there is in the market.

Of course, the free market doesn't work like that in reality.  But since no one in government seems willing to commit the heresy of questioning the perfection of the free market, maybe we could leverage the lowest corresponding price to convince the FCC that competition elsewhere in the marketplace makes posting a Form 470 redundant.

Conversely, the fact that the DOJ and others have pointed out that applicants are not getting the lowest corresponding price is proof that the Form 470 is a dismal failure in promoting enough competition to get the best pricing.

One more thing: if USAC runs a Cost Effectiveness Review and finds that an applicant paid too much for a service, shouldn't the service provider be turned over to the DOJ for not providing the lowest corresponding price?

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