The competitive incentives of vertically integrated local exchange carriers: An economic and policy analysis

The U.S. Congress passed sweeping telecommunications reform legislation in 1996 that will enable the Regional Bell Operating Companies (RBOCs) to enter the interLATA long-distance market once certain conditions are met. This legislation empowers the state public service commissions, the Federal Comm...

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Bibliographic Details
Published in:Journal of policy analysis and management 1998, Vol.17 (1), p.74-93
Main Authors: Sibley, David S., Weisman, Dennis L.
Format: Article
Language:English
Subjects:
Communication
Communications
Competition
Competitiveness
Congress
Cost efficiency
Cost incentives
Economic concentration
Federal legislation
Federal regulation
Incentives
Incumbents
Industrial regulation
Legislation
Long distance
Long distance telephone services
Marginal costs
Market prices
Market share
Price regulation
Public Policy
Reform
Telecommunications
United States
Vertical integration
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Summary:The U.S. Congress passed sweeping telecommunications reform legislation in 1996 that will enable the Regional Bell Operating Companies (RBOCs) to enter the interLATA long-distance market once certain conditions are met. This legislation empowers the state public service commissions, the Federal Communications Commission and the Justice Department to determine collectively when RBOC entry into interLATA long-distance markets satisfies the public interest. This article reveals that as long as RBOC long-distance market shares remain below certain critical levels, the RBOCs do not have the incentives (despite having the opportunity) to discriminate against their downstream competitors. These findings suggest that a public policy focused exclusively on eliminating the opportunity to discriminate may needlessly delay RBOC entry into interLATA markets and thereby deprive consumers of the benefits of enhanced competition.
ISSN:0276-8739
1520-6688
DOI:10.1002/(SICI)1520-6688(199824)17:1<74::AID-PAM5>3.0.CO;2-E