Implications of industry changes for producer price indexes for the U.S. domestic telephone service

Abstract

Important changes have recently swept the telecommunications industry into a new era. AT&T's divestiture of its local exchange telephone operations and the transition to equal access to the local telephone network for all long-distance providers are two of the most recent and most visible of these changes. The Federal Communications Commission also has been promoting competition in telecommunications and has moved to deregulate parts of the industry and to change the arcane way costs are recovered for the parts remaining under regulation. These changes have raised concerns about the course of telephone service prices. In this paper I discuss the implications of some of these changes for the construction of output price indexes for the telephone industry. I discuss the coverage of telephone services in the Producer Price Index program of the Bureau of Labor Statistics, and I discuss the implications of these changes for the PPI program.