Competition In U S Local Telecommunications Markets

This volume brings together academic economists and lawyers to evaluate and compare the regulation of telecommunications markets in Germany and the United States. The unifying theme in all of the pa pers is that the goal of public policy in this area should be to make the broadest and most functional competition possible by means of an ap propriate regulatory framework. Because the European and American telecommunications markets are becoming more intertwined each day, the issues addressed in this volume will be topical to the business, government, and academic communities for some time. For the chairman of the Monopoly Commission, Wernhard Moschel, the opening of the German telecommunications market has been successful in principle. This is clearly recognizable in the case of the competition in long-distance transport. Based on the view that the regulatory authority should make itself obsolete, Professor Moschel advocates an incremental review and gradual reduction of regulation.

The 1996 Telecommunications Act was an attempt to increase competition among telecommunications providers in the United States by reducing regulatory barriers to market entry. This competition was expected to drive innovation in the telecommunications sector and reap economic benefits for both American consumers and telecommunications providers. The legislation, however, had a markedly different impact. While many of the more aggressive providers enjoyed sharp short-term rises in stock market values, they soon faced sudden collapse, leaving consumers with little or no long-term benefit. In Competition and Chaos, Robert W. Crandall analyzes the impact of the 1996 act on economic welfare in the United States and how the act and its antecedents affected the major telecommunications providers. He argues that the act was far too stringent, inviting the Federal Communications Commission and state regulators to micromanage competitive entry into local telecommunications markets. Combined with the bursting of the dot.com and telecom stock market bubbles, this aggressive policy invited new and existing firms to invest billions of dollars unwisely, leading to the 2001–02 collapse of equity values throughout the sector. New entrants into the market invested more than $50 billion in unproductive assets that were quickly wiped out through massive failures. The 1996 act allowed the independent long-distance companies, such as MCI and AT&T, to live a few years longer. But today they are a threatened species, caught in a downward spiral of declining prices and substantial losses. The industry is preparing for an intense battle for market share among three sets of carriers: the wireless companies, the local telephone carriers, and the cable television businesses. Each has its own particular advantage in one of the three major segments of the market—voice, data, and video—but none is assured a clear path to dominance. Although the telecom stock market collapse i

The U.S. telecommunications industry has undergone dramatic changes in recent years that have touched almost every American home and business. The average American can dial almost anywhere in the world directly, store and forward a message, or transmit a fax in less than a minute; often for less than the real cost of a 500-mile telephone call tweny-five years ago. The combination of telecommunications breakthroughs, competition among new and old carriers, and the AT&T breakup has transformed the telephone industry and provided customers with a new array of equipment and services. Robert W. Crandall examines the effects of the AT&T breakup and weighs the costs and benefits to the residential and business consumer. On balance, he finds that the efficiency gains from opening up the telephone industry have more than offset the possible efficiency losses, which may be caused by the sacrifice of economies of scale and scope or the absence of fully compatible equipment and services. The replacement of regulation with competition has led to greater productivity in the telephone industry, a more efficient rate structure, and lower equipment prices. Crandall traces the telecommunications evolution from its early beginnings as pairs of copper wires up through the historic 1982 decision to divest. He investigates the impact of technological changes, competition, and the advent of divestiture on the quality of service, local and interexchange service rates, productive efficiency, and income distribution. He also focuses on problems that linger after the breakup in the increasingly competitive but highly regulated sector.

The authors analyze regulatory reform and the emergence of competitionin network industries using the state-of-the-art theoretical tools ofindustrial organization, political economy, and the economics ofincentives.