California Local Service (CALS) is the market for telephone service in the state of California. It’s a competitive market, but some competitors have trouble competing with Pac Bell. They blame Pacific Bell’s pricing policies, operational problems, and lack of compliance with the act. However, WorldCom Inc., parent company of MCI, says the problems aren’t unique to Pacific Bell. The competition in California is so intense that competitors are forced to pay more than they can recoup in customer rates.

Community services district

A Community services district is a special district of government that provides services to a specific area. This is a way for residents to have local control over certain governmental functions. These districts are funded through property taxes and may also generate revenues directly. They are made up of approximately 10 percent of the total number of special districts in California. While most special districts are limited to providing one service, a community services district can provide up to 32 different services.

The Cosumnes Community Services District is a politically-designated local government that administers services in a community. The district is guided by an elected board of directors. It provides services for the 3rd, 7th, and 9th Congressional Districts and the 8th and 9th State Assembly Districts. It covers about 157 square miles in Southern Sacramento County.

Unbundled local switching prices

In 1996, the US Congress passed the Telecommunications Act, which promoted competition in the local telecommunication market. Part of that law required incumbent local exchange carriers to provide unbundled network elements and allow resale of their services. The Act has helped consumers get lower rates on their phone bills, as they can choose from multiple providers.

TELRIC-based pricing

Pacific Communications, Inc. filed an application to have its rates adopted in California using TELRIC-based pricing. In its application, Pacific clarified its pricing proposals and argues that they are TELRIC-compliant. The CPUC rejected this application, but did not disallow it.

The traditional public-utility model relied on embedded costs to set rates. This asymmetry of information, while beneficial to utilities, increased the complexity of reckoning. In TELRIC-based pricing, incumbents and competitors present competing economic models to the state commission, who customarily assign rates based on predictions from the two models.

Geographically deaveraged pricing

Deaveraged pricing for telecommunications services is one way to ensure that competitors have the same costs. However, deaveraging should only be used where all competitors can reasonably price their retail services based on their underlying costs. GTE has sued the utility for fraudulent network pricing. If the ruling stands, Sprint will be free to negotiate new terms with GTE, including geographic deaveraging of its rates.

The FCC has long used geographic averaging of rates to ensure that telephone service is affordable for rural customers. Geographic deaveraging matches the cost of unbundled elements with the price of those services. However, GTE would be at a competitive disadvantage if it were forced to deaverage its unbundled elements.

WorldCom’s ULS prices

WorldCom and AT&T are incorrectly stating that their current ULS prices in California will allow them to enter the rural market. The problem is that WorldCom is using a misleading margin analysis that ignores the underlying retail prices. As Professor Dale E. Lehman points out, the problem is with the prices of rural access services, not ULS prices.

According to the UNE-P model, the company would have to charge the same prices for the same product in lower-cost states, but a different price for the same product in a higher-priced state. However, this analysis is meaningless because of the differences in cost between different states.