The Telecommunications Act of 1996: The “Costs” of Managed Competition: The `Costs' of Managed Competition

Portada
Springer Science & Business Media, 2000 M09 30 - 128 páginas
The Telecommunications Act of 1996 envisioned a competitive free-for-all in the U.S. telecommunications industry with removal of barriers to entry in local telecommunications markets and the lifting of the artificial restrictions that kept the Regional Bell Operating Companies (RBOCs) out of the interLATA long-distance market. After close to 5 years, only one RBOC has been granted permission (controversially) to enter the interLATA market, and local competition has yet to provide most consumers with meaningful choices. In addition, the wave of mergers across the industry has raised the specter of putting the former Bell System back together again. Policymakers now openly question whether the Act can deliver what it promised.
Three principal themes are developed in this book. First, there has been a coordination failure between Congress and the FCC in translating the principles embodied in the Act into practice. The authors provide evidence for this by analyzing stock market reactions to legislative and regulatory actions. This coordination failure was largely predictable, given the ambiguity in the Act, as well as conflicting jurisdictions between the FCC and the states.
Second, the Act calls for wholesale prices to be `based on cost.' Regulators adopted a costing standard (TELRIC) that provides a means to subsidize competitive entry in local telephone service markets. The ready adoption of the TELRIC standard by regulators is shown to be tied to the third theme: price cap regulation provides regulators with `insurance' against the adverse effects of competition in local telephone markets. Statistical analysis reveals that regulators in price cap states set uniformly lower unbundled network element prices (lower barriers to entry) in comparison with regulators in rate-of-return and earnings sharing states. The result is a triumph of regulatory processes over market processes - the antithesis of the purpose of the Act.

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Contenido

Chapter 1 INTRODUCTION AND OVERVIEW
ix
INDUSTRY TRENDS AND MARKET STRUCTURE
7
22 CONGRESSIONAL EXPECTATIONS
10
23 DEMAND SIDE CONSIDERATIONS
12
24 PUBLIC POLICY ISSUES
13
25 DOES SIZE MATTER?
14
26 RBOC ENTRY INTO INTERLATA LONG DISTANCE
14
27 THE FUTURE
15
62 HISTORICAL NOTES
56
63 EMBEDDED AND FORWARDLOOKING COSTS
59
64 METHODOLOGY
62
BASE CASE SCENARIO
63
66 DECREASING INVESTMENT COSTS
64
67 ASYMMETRIC DEPRECIATION PERIODS
66
68 SIMULATION RESULTS
68
69 EMPIRICAL ANALYSIS
71

THE STOCK MARKET REACTS 31 INTRODUCTION
17
32 STOCK PRICES
18
33 EVENTS ANALYSIS
22
ALTERNATIVE EVENTS ANALYSIS
26
A JURISDICTIONAL MODEL 41 INTRODUCTION
29
42 BENCHMARK RESULT
30
43 THE MULTIPLE AGENT MODEL
31
44 WHO SETS WHOLESALE PRICES?
39
THE FCCS EFFICIENTFIRM STANDARD TELRIC 51 INTRODUCTION
43
52 STATUTORY AND REGULATORY COSTING STANDARDS
45
53 THE EFFICIENTFIRM VS THE PRICE CAP APPROACH
46
54 STRATEGIC BEHAVIOR
49
55 THE PARADOX OF DISPARATE COST STANDARDS
52
56 CONCLUSIONS
54
BACK TO THE FUTURE1 61 INTRODUCTION
55
610 CONCLUSIONS
73
ASSUMPTIONS USED IN THE SENSITIVITY ANALYSIS
76
EXPLAINING STATE REGULATORY ACTIONS 71 INTRODUCTION
79
72 PCR IN THEORY AND PRACTICE
82
73 PRINCIPLES TO FOSTER REGULATORY COMMITMENT
88
74 THE ECONOMIC AND LEGAL FOUNDATIONS OF A COMPLETE PRICE CAP
90
75 POLICY IMPLICATIONS
93
DATA USED IN THE REGRESSIONS
94
ADDITIONAL EMPIRICAL RESULTS
97
Chapter 8 CONCLUSIONS
103
References
109
Name Index
117
Subject Index
119
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