Managed Competition in U.S. Telecommunications

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.

Charles Ferguson and the "Broadband Problem"

Charles Ferguson has published a book that advocates a major increase in government intervention in the U.S. market for high-speed, "broadband" Internet services. His proposals are based on a faulty understanding of the effects of current telecommunications regulation and unsubstantiated claims that current participants in the broadband marketplace are exercising monopoly power. His policy recommendations would not only fail to accelerate the pace of broadband diffusion in the United States, but they would surely provide a disincentive for carriers to invest in the network upgrades required to extend broadband and to provide even higher-speed Internet access for U.S. consumers.Technology and Industry, Regulatory Reform

The Effects of U.S. Trade Protection for Autos and Steel

macroeconomics, trade protection, steel, autos

Federal Government Initiatives to Reduce the Price Level

macroeconomics, income policy, U.S. government, price level, federal government

Telecommunications Policy Reform in the United States and Canada

The Telecommunications Act of 1996 marked a fundamental departure in U.S. regulation. Monopoly market structures were officially deemed inefficient, and extensive rules were authorized to jump-start competition. Canada opened long-distance markets to entrants in 1992, and did likewise with local telephone access five years later, but employed distinct tools from those utilized by U.S. regulators. In this paper we compare and contrast the two alternative approaches to deregulation. The conventional wisdom is that telephone competition in the U.S. has lagged under the Telecommunications Act. Rates are alleged to have risen for most customers, just the reverse of what was promised by policy makers. We examine broad trends within the sector, and conclude that the Act, while flawed, actually scores well in comparison to previous reform measures. We prefer the approach taken in Canada, however, which is less regulation-intensive in the transition to competition.

Why the Government Should Not Regulate Internet Telephony?

The Federal Communications Commission has requested comments on the regulation of voice telephone services delivered over the Internet, dubbed "VoIP" or Voice over Internet Protocol. This paper examines whether there is a need to regulate VoIP. We conclude that there is no economic rationale for regulating VoIP and that consumers will likely be worse off if VoIP is regulated. Furthermore, the emergence of new technologies, such as VoIP, is rapidly eroding the rationale for continuing to regulate local telephone services.

Bandwidth for the People

President Bush recently called for "universal, affordable access to broadband technology by the year 2007." This paper examines the economic strengths and weaknesses of different policies for achieving that vision. We argue that removing price and "unbundling" regulations at the wholesale and retail levels would help increase the diffusion of broadband. Banning Internet access taxes would be beneficial, but we believe such a ban would be less effective than removing these regulatory barriers to competition. We argue against subsidizing broadband to increase penetration because subsidies are likely to result in economic inefficiencies. The study also examines state policies that could be used to enhance the rollout of broadband, including reducing the regulatory burden associated with right-of-way access and eliminating retail price regulation.

Pricing Issues in Telecommunications

Over the last quarter century, significant changes have occurred in telecommunications. The breakup of AT&T and a myriad of technological innovations have sounded the death knell for the theory of telecommunications as a natural monopoly, according to Robert W. Crandall of the Brookings Institute. In the following article, Dr. Crandall assesses a variety of pricing issues that must be addressed by regulators, telecommunications firms and consumers in an increasingly competitive telecommunications market

Comentario a Sidney Weintraub

Sidney Weintraub nos presenta una reseña útil y completa de la floreciente bibliografía sobre los efectos potenciales del TLC en sectores e industrias individuales. Comparto la intranquilidad de Weintraub en cuanto al uso de estos estudios diversos para pronosticar los efectos precisos de la liberalización, pero convengo también en que los modelos cuantitativos, por imperfectos que sean, suelen ser mejores que las conjeturas informadas. Es interesante advertir que gran parte del análisis se ha concentrado en Estados Unidos en industrias donde podría haber considerables desplazamientos del empleo en contra de Estados Unidos y a favor de México. Al mismo tiempo, es lamentable que se haya prestado escasa atención a las industrias en las que Estados Unidos podría ganar empleos, como la de maquinaria, la electrónica y el tabaco.