Okay, let's say the FCC pays each company based on its own costs and, as you suggest, the new competitor's costs are lower. What is the rationale for paying the incumbent a higher subsidy for providing the same basic local phone service? Perhaps the problem with the current system is not that competitors get identical support but that this support is tied to the less efficient competitor. If a competitor offers service and does so at lower cost, it makes sense to reduce the support paid to the incumbent in recognition that a lower cost provider is available. To do otherwise simply subsidizes ineffiency.
