Exporting Telecommunications Regulation: The U.S.-Japan Negotiations on Interconnection Pricing

Since 1997, the U.S. government has attempted to use the World Trade Organization (WTO) agreement on telecommunications services as a vehicle for 'exporting' American principles of telecommunications regulation to other nations. The United States took the position in 1997 that the WTO telecommunications agreement requires its signatory nations to follow the practices of the Federal Communications Commission (FCC) on telecommunications regulatory policy. Subsequently, the Office of the U.S. Trade Representative (USTR) has sought to influence, under the implicit threat of trade sanctions, Japan's domestic regulatory policy on the pricing of mandatory competitor access to the unbundled elements of the local network belonging to the operating companies of Nippon Telegraph and Telephone Corporation (NTT). In this Article, we examine the substantive difficulties of engrafting the FCC's interconnection policy onto the telecommunications marketplace of another nation. For more than five years, many American experts on telecommunications policy have disagreed whether American consumers have benefited from the very FCC policies that the USTR would have Japanese regulators emulate. The USTR's initiative appears to ignore that the transition to costoriented rates for interconnection and retail telecommunications services has been a difficult and unfinished process in the United States; that the cost models used by the FCC to set interconnection prices have significant deficiencies; that actual interconnection prices both within and outside the United States diverge considerably from the estimates of the FCC's cost models; that variations across countries in the prices of inputs have a significant effect on the costs of interconnection; and that, with respect to depreciation in particular, regulators treat this cost differently'and, from an economic perspective, more reasonably'in Japan than in the United States. Such substantive economic considerations suggest why the FCC's policy in this area has generated continuous litigation, including two Supreme Court cases, since 1996 and consequently is too unresolved at this point in the American experience for the United States to force on its trading partners. Next, we ask whether the USTR has the detailed knowledge required to negotiate trade agreements on interconnection pricing. We question the propriety of using the USTR to influence the domestic regulatory policy of another country on a topic as complex as the efficient pricing of mandatory access to unbundled network elements. The USTR's power to formulate trade policy on this subject resides in officials who are unlikely to possess the economic expertise and resources necessary to evaluate the consumer-welfare implications of the policies that they would have Japan and other nations adopt. For these reasons, the USTR cannot credibly make the interconnection pricing policies of another nation a legitimate concern of U.S. trade policy.

A Theory of Interdependent Demand for a Communications Service

The utility that a subscriber derives from a communications service increases as others join the system. This is a classic case of external economies in consumption and has fundamental importance for the economic analysis of the communications industry. This paper analyzes the economic theory of this kind of interdependent demand. We begin by defining "equilibrium user set" as a set of users consistent with all individuals' (users and nonusers) maximizing their utilities. There are typically multiple equilibria at any given price, and which equilibrium is attained depends partly on the static model, partly on the initial disequilibrium conditions, and partly on the disequilibrium adjustment process. Some general properties of equilibrium user sets are derived. Then we turn our attention to some specific models based on simple characterizations of communities of interest. The implications for pricing are discussed, with special reference to the problem of starting up a new communications service (e.g., a video communications service).

Using Combat Losses of Medical Personnel to Estimate the Value of Trauma Care in Battle: Evidence from World War II, Korea, Vietnam, Iraq, and Afghanistan

The article of record as published may be found at https://doi.org/10.1080/10242694.2015.1005897This study investigates the effect that US medical personnel deaths in combat have on other unit deaths and ‘mili- tary success,’ which we measure using commendation medals as a proxy. We use a difference-in-differences identi- fication strategy, measuring the changes over time in these outcomes following the combat loss of a medic or doctor and comparing it to the changes following the combat loss of a soldier who is not a medic or doctor. We find that overall unit deaths decrease in the five or ten days following the deaths of medical personnel in Vietnam, Korea, and the Pacific theater in World War II (WWII). In contrast, the WWII European and North African results indicate that overall unit deaths rise following medical personnel deaths. We find no relationship between medical personnel deaths and other unit deaths in Iraq and Afghanistan. For Korea and the Pacific theater of WWII, our estimates suggest unit commendation medals decrease following the deaths of medical personnel. This pattern of evidence is consistent with a model in which units often halted aggressive tactical maneuvers and reduced pursuit of their military objectives until deceased medical personnel were replaced. The results for the other conflicts are mixed and show little connection between medical personnel deaths and commendation medals