'Unhappy Contracts': The Structure and Effect of Telecommunication Interconnection Agreements

45 Pages Posted: 13 Dec 2004

Date Written: December 2004

Abstract

While most contracts are made between two parties in search of profit and without substantial government scrutiny, some are not so happy. This project examines one such species, the interconnection agreement entered into under the 1996 Telecommunications Act. After discussing the history and requirements of the statute, the paper hypothesizes that instead of the more typical profit maximization motive, the dominant party, in this case the incumbent local service provider, might seek to minimize losses. As in other cases where there is substantial uncertainty, parties to interconnection agreements might also be expected to cluster payment terms around some common patterns, or focal points.

The empirical section of the paper investigates these hypotheses through the complete set of 140 contracts entered into in Michigan between various phone companies entering the local phone market, called CLECs, and one local incumbent provider, SBC. Not only does the paper look at what determines various contract terms, but also it examines through Michigan Public Service Commission minutes, litigated cases and contract amendments what characteristics predict whether the parties can successfully adjust over time or whether they continue to experience conflict.

Keywords: contracts, telecommunications, bargaining, empirical, relational contracts

JEL Classification: B41, C21, C25, K12, K23, L96

Suggested Citation

Friedlander Brinig, Margaret, 'Unhappy Contracts': The Structure and Effect of Telecommunication Interconnection Agreements (December 2004). U Iowa Legal Studies Research Paper No. 04-02, Available at SSRN: https://ssrn.com/abstract=634223 or http://dx.doi.org/10.2139/ssrn.634223

Margaret Friedlander Brinig (Contact Author)

Notre Dame Law School ( email )

P.O. Box 780
3157 Eck Hall of Law
Notre Dame, IN 46556-0780
United States
574-631-2303 (Phone)
574-631=8078 (Fax)

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