Economic implications of collocation for the exchange access market

During the past few years competitive access providers have deployed networks in selected major metropolitan areas across the USA and are offering local distribution services to long-distance companies in direct competition with telephone company services. To substantially expand the scope of the market in which they operate without dramatically increasing their network investment, they have requested state and federal regulatory agencies to allow the collocation of their transmission equipment inside telephone companies' local switching offices. Several major policy issues arise: If local telephone company access service prices continue to be tightly regulated, will the benefits of competition in the form of lower long-distance prices ultimately reach consumers? Would a national collocation policy simply redistribute industry revenues without directly benefiting the general public? And could collocation become a mechanism for long-distance companies to vertically integrate their operations into local exchange markets less than a decade after the massive effort to separate the toll and local markets that culminated in the AT&T divestiture?