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

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

Author: Dale E. Lehman

Publisher: Springer Science & Business Media

Published: 2012-12-06

Total Pages: 134

ISBN-13: 1461543150

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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.


Book Synopsis The Telecommunications Act of 1996: The “Costs” of Managed Competition by : Dale E. Lehman

Download or read book The Telecommunications Act of 1996: The “Costs” of Managed Competition written by Dale E. Lehman and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 134 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Managed Competition in U.S. Telecommunications

Managed Competition in U.S. Telecommunications

Author: Robert W. Crandall

Publisher:

Published: 2009

Total Pages: 0

ISBN-13:

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The 1996 Telecommunications Act represents a major turn in U.S. policy towards "deregulation." Instead of tying price deregulation to the opening of entry in a market that has been regulated for decades, the Act creates a maze of new regulatory responsibilities for the Federal Communications Commission (FCC) and the states. Incumbent local telephone companies, who were being freed from cost-based regulation prior to 1996, are now subject to detailed regulation of their wholesale services. Specifically, they must "unbundle" their network facilities into a large number of components and lease these components or "elements" to entrants at cost. Moreover, the Bell companies are not permitted to compete with long distance companies until they satisfy regulators that they have complied with a large number of interconnection requirements. This complex new regulatory regime has been the source of three years of regulatory battles and legal challenges and has needlessly delayed facilities-based entry into telecommunications. It would be far better if the FCC and the states were to pursue a strategy of full deregulation. The regulators should announce a date sufficiently far in the future at which all rate and entry regulation will cease, much as the Congress did for airlines in 1978. This would place potential competitors and customers on notice that fully flexible rates will be in place on this date and that new opportunities could be available for both. It also would reduce the value of rent seeking before the regulatory commissions and the never-ending cycle of rulemakings and court appeals.


Book Synopsis Managed Competition in U.S. Telecommunications by : Robert W. Crandall

Download or read book Managed Competition in U.S. Telecommunications written by Robert W. Crandall and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The 1996 Telecommunications Act represents a major turn in U.S. policy towards "deregulation." Instead of tying price deregulation to the opening of entry in a market that has been regulated for decades, the Act creates a maze of new regulatory responsibilities for the Federal Communications Commission (FCC) and the states. Incumbent local telephone companies, who were being freed from cost-based regulation prior to 1996, are now subject to detailed regulation of their wholesale services. Specifically, they must "unbundle" their network facilities into a large number of components and lease these components or "elements" to entrants at cost. Moreover, the Bell companies are not permitted to compete with long distance companies until they satisfy regulators that they have complied with a large number of interconnection requirements. This complex new regulatory regime has been the source of three years of regulatory battles and legal challenges and has needlessly delayed facilities-based entry into telecommunications. It would be far better if the FCC and the states were to pursue a strategy of full deregulation. The regulators should announce a date sufficiently far in the future at which all rate and entry regulation will cease, much as the Congress did for airlines in 1978. This would place potential competitors and customers on notice that fully flexible rates will be in place on this date and that new opportunities could be available for both. It also would reduce the value of rent seeking before the regulatory commissions and the never-ending cycle of rulemakings and court appeals.

The Telecommunications Act Of 1996

The Telecommunications Act Of 1996

Author: Dale E Lehman

Publisher:

Published: 2000-09-01

Total Pages: 144

ISBN-13: 9781461543169

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Book Synopsis The Telecommunications Act Of 1996 by : Dale E Lehman

Download or read book The Telecommunications Act Of 1996 written by Dale E Lehman and published by . This book was released on 2000-09-01 with total page 144 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Expanding Competition in Regulated Industries

Expanding Competition in Regulated Industries

Author: Michael A. Crew

Publisher: Springer Science & Business Media

Published: 2013-03-09

Total Pages: 216

ISBN-13: 1475731922

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Expanding Competition in Regulated Industries reviews the changing regulatory environment, notably incentive regulation and competition in regulated industries. Some of the major changes in electricity, gas, and telephone utilities allow for competition in local service through unbundling. This book is of interest to researchers, utility managers, regulatory commissions, and the Federal Government.


Book Synopsis Expanding Competition in Regulated Industries by : Michael A. Crew

Download or read book Expanding Competition in Regulated Industries written by Michael A. Crew and published by Springer Science & Business Media. This book was released on 2013-03-09 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt: Expanding Competition in Regulated Industries reviews the changing regulatory environment, notably incentive regulation and competition in regulated industries. Some of the major changes in electricity, gas, and telephone utilities allow for competition in local service through unbundling. This book is of interest to researchers, utility managers, regulatory commissions, and the Federal Government.

Changing Industry Structure

Changing Industry Structure

Author: Jerry B. Duvall

Publisher:

Published: 2004

Total Pages: 0

ISBN-13:

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The Telecommunications Act of 1996 (the "1996 Act"), by stressing the reduction or elimination of entry barriers that prevent the fragmentation of market structure and an increase in the number of competitors, established competition and deregulation as the foundation for public policy towards the telecommunications and commercial broadcasting industries. By lowering barriers to entry, telecommunications markets should be expected to grow as new firms expand industry capacity and broaden the scope of consumer choice. Presumably, market concentration will decline as entry continues, eventually producing sufficient fragmentation that competitive rivalry will obviate the continuing need for regulation. Suppose, however, that the ongoing process of competitive entry becomes truncated and market concentration fails to continue falling even if market size continues to grow so that concentration appears to reach a lower bound. There is some evidence suggesting that such a lower bound may, in fact, exist in local telecommunications markets, notwithstanding the statutory provisions of the 1996 Act reducing barriers to entry. This Policy Paper draws from the analyses of competition developed over the last decade or so that offers new insights about the market size-market concentration relationship. The Policy Paper proposes that this new economic thinking is directly applicable to understanding the evolution of entry and competition in telecommunications markets and the growing concentration in commercial broadcasting markets following adoption of the 1996 Act. Moreover, this new economic thinking, unlike the more standard analyses of market structure and competition, provides guidance for public policy towards both telecommunications and broadcast markets.


Book Synopsis Changing Industry Structure by : Jerry B. Duvall

Download or read book Changing Industry Structure written by Jerry B. Duvall and published by . This book was released on 2004 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Telecommunications Act of 1996 (the "1996 Act"), by stressing the reduction or elimination of entry barriers that prevent the fragmentation of market structure and an increase in the number of competitors, established competition and deregulation as the foundation for public policy towards the telecommunications and commercial broadcasting industries. By lowering barriers to entry, telecommunications markets should be expected to grow as new firms expand industry capacity and broaden the scope of consumer choice. Presumably, market concentration will decline as entry continues, eventually producing sufficient fragmentation that competitive rivalry will obviate the continuing need for regulation. Suppose, however, that the ongoing process of competitive entry becomes truncated and market concentration fails to continue falling even if market size continues to grow so that concentration appears to reach a lower bound. There is some evidence suggesting that such a lower bound may, in fact, exist in local telecommunications markets, notwithstanding the statutory provisions of the 1996 Act reducing barriers to entry. This Policy Paper draws from the analyses of competition developed over the last decade or so that offers new insights about the market size-market concentration relationship. The Policy Paper proposes that this new economic thinking is directly applicable to understanding the evolution of entry and competition in telecommunications markets and the growing concentration in commercial broadcasting markets following adoption of the 1996 Act. Moreover, this new economic thinking, unlike the more standard analyses of market structure and competition, provides guidance for public policy towards both telecommunications and broadcast markets.

Competition and Chaos

Competition and Chaos

Author: Robert W. Crandall

Publisher: Rowman & Littlefield

Published: 2005-04-26

Total Pages: 225

ISBN-13: 0815797702

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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


Book Synopsis Competition and Chaos by : Robert W. Crandall

Download or read book Competition and Chaos written by Robert W. Crandall and published by Rowman & Littlefield. This book was released on 2005-04-26 with total page 225 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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

Antitrust Law Journal

Antitrust Law Journal

Author:

Publisher:

Published: 1986

Total Pages: 1136

ISBN-13:

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Book Synopsis Antitrust Law Journal by :

Download or read book Antitrust Law Journal written by and published by . This book was released on 1986 with total page 1136 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Modern Economic Regulation

Modern Economic Regulation

Author: Christopher Decker

Publisher: Cambridge University Press

Published: 2014-10-30

Total Pages: 489

ISBN-13: 1139992139

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Drawing from the most recent work on economic regulation, this book introduces readers to the main principles and examines how economic regulation is applied in four key public utility industries - electricity, gas, water and telecommunications. Written for students and practitioners with little prior knowledge of economic regulation, this is an accessible, non-technical entry point to the subject area, exploring the fundamental questions: Why do we regulate? What are alternatives to regulation? Which institutions are involved in regulation? What have been the impacts of regulation? Readers will gain a clear understanding of the basic principles that apply to all regulated sectors, as well as the regulatory choices that reflect the specific economic and physical characteristics of different industries. Case studies demonstrate connections between regulatory theory and practice, and extensive references provide readers with resources for more in-depth study.


Book Synopsis Modern Economic Regulation by : Christopher Decker

Download or read book Modern Economic Regulation written by Christopher Decker and published by Cambridge University Press. This book was released on 2014-10-30 with total page 489 pages. Available in PDF, EPUB and Kindle. Book excerpt: Drawing from the most recent work on economic regulation, this book introduces readers to the main principles and examines how economic regulation is applied in four key public utility industries - electricity, gas, water and telecommunications. Written for students and practitioners with little prior knowledge of economic regulation, this is an accessible, non-technical entry point to the subject area, exploring the fundamental questions: Why do we regulate? What are alternatives to regulation? Which institutions are involved in regulation? What have been the impacts of regulation? Readers will gain a clear understanding of the basic principles that apply to all regulated sectors, as well as the regulatory choices that reflect the specific economic and physical characteristics of different industries. Case studies demonstrate connections between regulatory theory and practice, and extensive references provide readers with resources for more in-depth study.

Obtaining the best from Regulation and Competition

Obtaining the best from Regulation and Competition

Author: Michael A. Crew

Publisher: Springer Science & Business Media

Published: 2006-02-20

Total Pages: 247

ISBN-13: 038723196X

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Deregulation has introduced competition into traditionally monopolistic markets, particularly telecommunications and electric utilities. This book brings together ten essays that were presented at the Center for Research in Regulated Industries at Rutgers University and funded by several regulated companies. The authors, who include young scholars as well as established and highly regarded consultants and researchers, address some of the major issues now facing network industries and regulators - deregulation, competition, stranded assets, diversification, pricing, and mergers and acquisitions.


Book Synopsis Obtaining the best from Regulation and Competition by : Michael A. Crew

Download or read book Obtaining the best from Regulation and Competition written by Michael A. Crew and published by Springer Science & Business Media. This book was released on 2006-02-20 with total page 247 pages. Available in PDF, EPUB and Kindle. Book excerpt: Deregulation has introduced competition into traditionally monopolistic markets, particularly telecommunications and electric utilities. This book brings together ten essays that were presented at the Center for Research in Regulated Industries at Rutgers University and funded by several regulated companies. The authors, who include young scholars as well as established and highly regarded consultants and researchers, address some of the major issues now facing network industries and regulators - deregulation, competition, stranded assets, diversification, pricing, and mergers and acquisitions.

Competitive Transformation of the Postal and Delivery Sector

Competitive Transformation of the Postal and Delivery Sector

Author: Michael A. Crew

Publisher: Springer Science & Business Media

Published: 2012-12-06

Total Pages: 392

ISBN-13: 1441989153

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Competitive Transformation of the Postal and Delivery Sector is an indispensable source of information and analysis on the current state of the postal and delivery sector. It offers current insights of leading researchers and practitioners into strategy and regulation as well as the economics of this sector. Issues addressed include national and international perspectives, financial viability, the universal service obligation, regulation, competition, entry, the role of scale and scope economies, the nature and role of cost and demand analysis in postal service, productivity, interaction of law and economics, human resources, transition and reform issues. The papers in the book were selected from the papers presented at the 11th Conference on Postal and Delivery Economics, Toledo, Spain, June 4-7, 2003.


Book Synopsis Competitive Transformation of the Postal and Delivery Sector by : Michael A. Crew

Download or read book Competitive Transformation of the Postal and Delivery Sector written by Michael A. Crew and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 392 pages. Available in PDF, EPUB and Kindle. Book excerpt: Competitive Transformation of the Postal and Delivery Sector is an indispensable source of information and analysis on the current state of the postal and delivery sector. It offers current insights of leading researchers and practitioners into strategy and regulation as well as the economics of this sector. Issues addressed include national and international perspectives, financial viability, the universal service obligation, regulation, competition, entry, the role of scale and scope economies, the nature and role of cost and demand analysis in postal service, productivity, interaction of law and economics, human resources, transition and reform issues. The papers in the book were selected from the papers presented at the 11th Conference on Postal and Delivery Economics, Toledo, Spain, June 4-7, 2003.