As a fragment of the former Bell system and the incumbent provider of local telephone service, Qwest is specifically prohibited by federal law from providing long distance telecommunications service in areas where it has traditionally offered local service. This means that it cannot provide voice and data service between Arizona and New Mexico, for example, nor between Phoenix and Tucson for that matter. To enter these markets, Qwest must obtain permission from state and federal regulators.
This study reviews the debate over allowing local phone companies such as Qwest to provide long distance services. It also examines consumer experience in other states that have allowed the local phone company to provide long distance services. Finally, this study looks at the effects of increased competition on several groups in Arizona.
The entry of Qwest into long distance markets in Arizona would be the most significant change to the state's telecommunications markets in the near term. The company will be able to capture economies of scale and scope to offer low-cost voice and data communications and attractive bundled service offerings.
Research and actual experience lead us to conclude that allowing Qwest to enter into long distance in Arizona will increase competition in local and long distance markets. This study finds that although all consumers generally will enjoy lower prices as a result of competition, residential and small business customers, especially low-volume users, will benefit disproportionately. For example, this research suggests that Arizona senior citizens will benefit significantly from additional competition. The increase in competition and lowering of prices is expected to save Arizona seniors as much as $150 from their annual phone bills. Primary and secondary school districts also will benefit significantly-saving millions in communications and Internet expenses.