Opportunities vs incentives to discriminate in the US telecommunications industry

Telecommunications Policy

Volumn 21, Issue 4, 1997, Pages 309-316

  Weisman, Dennis L ^a   Zhang, Mingyuan ^a  

^a KANSAS STATE UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

COMPETITION; LAWS AND LEGISLATION; MARKETING;

REGIONAL BELL OPERATING COMPANIES (RBOC);

LONG DISTANCE TELEPHONE SYSTEMS;

EID: 0031142240     PISSN: 03085961     EISSN: None     Source Type: Journal    
DOI: 10.1016/S0308-5961(97)00011-6     Document Type: Article

References (34)

1. See MacAvoy, P W 'Tacit collusion by regulation: pricing of interstate long distance telephone services' Journal of Economics and Management Strategy 1995 4 147-185; Taylor, W E and Taylor, L D 'Post-divestiture long-distance competition in the United States' 83 American Economic Review, Papers and Proceedings, 1993, 185; Huber, P W, Kellogg, M and Thome, J The Geodesic Network 11:1993 Report on Competition in Telephone Industry, February 1992. Washington DC.
2. See MacAvoy, P W 'Tacit collusion by regulation: pricing of interstate long distance telephone services' Journal of Economics and Management Strategy 1995 4 147-185; Taylor, W E and Taylor, L D 'Post-divestiture long-distance competition in the United States' 83 American Economic Review, Papers and Proceedings, 1993, 185; Huber, P W, Kellogg, M and Thome, J The Geodesic Network 11:1993 Report on Competition in Telephone Industry, February 1992. Washington DC.
3. See MacAvoy, P W 'Tacit collusion by regulation: pricing of interstate long distance telephone services' Journal of Economics and Management Strategy 1995 4 147-185; Taylor, W E and Taylor, L D 'Post-divestiture long-distance competition in the United States' 83 American Economic Review, Papers and Proceedings, 1993, 185; Huber, P W, Kellogg, M and Thome, J The Geodesic Network 11:1993 Report on Competition in Telephone Industry, February 1992. Washington DC.
4. Keller, J J 'Home Court' The Wall Street Journal September 16 1996 R14.
5. See Baumol, W J and Sidak, G J Toward Competition in Local Telephony. The MIT Press, Cambridge (1994) pp. 20-21.
6. See S.652 (The Telecommunications, Reform Act of 1996), 104th Congress, 2nd Session, Jan. 1996 and Nalk, G Going Long. The Wall Street Journal, September 16, 1996, R12.
7. See S.652 (The Telecommunications, Reform Act of 1996), 104th Congress, 2nd Session, Jan. 1996 and Nalk, G Going Long. The Wall Street Journal, September 16, 1996, R12.
8. The competitive checklist requires, among other things, that a Bell operating company provide nondiscriminatory access and unbundled services to other telecommunications carriers. See S.652, p, 94, ibid.
9. See News Roundup, Telecom Vote Signals Competitive Free-for-All, The Wall Street Journal, February 2, 1996, B3.
10. Nalk Gautam 'Going Long' The Wall Street Journal, September 16, 1996, R12.
11. Ibid, section 251(c)(2)(C).
12. For example, the regulator can reduce the share of the incremental profits the RBOCs generate in the regulated access exchange market, or impose a more stringent form of price cap regulation.
13. See Economics and Technology, Inc./ Hatfield Associates and Inc. (1994, 2). Furthermore, according to another recent study, AT&T still pays 98.9% of its access charges to the local exchange carriers. See Bemheim and Willig (1994, p. 16).
14. For a discussion of competition in the local exchange market, see Bernheim, D B and Willig, R D Appropriate Preconditions for Removal of the InterLATA on the RBOCs. Affidavit filed with the United States Department of Justice on behalf of Ameritech regarding Civil Action No. 82-0192, February 1994.
15. See Bemheim and Willig, ibid.
16. Bernheim and Willig, ibid.
17. Sievers, M, 1994, 5-8, Should the Inter-LATA Restriction be Lifted? Analysis of the Significant Issues, Paper Presented at Rutgers University Advanced Workshop in Regulation and Public Utility Economics. 7th Annual Western Conference, San Diego, California. (July 6-8). However, this does not mean that the RBOC's effective exchange access payments are zero for such intra-region traffic.
18. Vickers, J 'Competition and regulation in vertically regulated markets' The Review of Economic Studies, 62, 1-17
19. See Naik, 1996, ibid.
20. According to Bernheim and Willig (1994, 22), op cit Ref 11, the RBOCs' monopoly position in local exchange markets makes it possible to extend market power to the downstream market.
21. According to Keller (the WSJ, Sep. 16, 1996), the RBOCs' current long distance market share is only 7.2%.
22. See Taylor, L D Telecommunications Demand in Theory and Practice, Boston, Kluwer Academic Publishers (1994) p. 143.
23. Weisman D L Regulation and the vertically integrated firm: the case of RBOC entry into InterLATA long distance. Journal of Regulatory Economics 1995 8(3) 1995 249-266
24. Op cit Ref 11.
25. (0.6)(2)+(0.4)(1)=1.6 minutes.
26. Taylor, LD op cit Ref 19.
27. Assume a linear market demand function P=a+bQ for the long distance market.
28. This comes from $0.039 per end.
29. The total unit cost is $0.078+$0.005= $0.083/minute.
30. For the calculation of the critical market share, see Sibley, D S and Weisman, D L 'Raising rivals costs: entry of an upstream monopolist into downstream markets. Kansas State University, Working Paper February 1997.
31. See Lapin, S 'Merger action heats up after first-quarter dip' The Wall Street Journal, April 8, 1996, A3.
32. See The Wall Street Journal, ibid (Feb. 2, 1996, B3).
33. See Lapin, S and Kansas, D 'Two ex-bell siblings to combine' The Wall Street Journal, April 2, 1996, A3, C1 and B1.
34. See Cauley, L 'Bell Atlantic and Nynex discuss merger to form second-biggest phone firm' The Wall Street Journal, December 18, 1995 A3.