What Hath Congress Wrought? Reorienting Economic Analysis of Telecommunications Markets after the 1996 Act
16 Pages Posted: 22 Oct 2004
Abstract
As competition for telecommunications products and services develops and market performance improves, regulation by the Federal Communications Commission (FCC) will begin to change as well. In light of these sweeping changes, economic analysis of telecommunications markets will have to account for this evolving competitive landscape. Indeed, the changes set in motion by the 1996 Act will present far more complicated analytical problems of economic issues than before, when these issues seemed be familiar and clearly delineated -- i.e., evil monopolists or dominant firms with a helpless fringe. Now, with the potential convergence of technologies and bundling of products, the lines between customers and competitors will become increasingly blurred.
Further, as the world of telecommunications rapidly continues to change, it will become more and more difficult to determine exactly what is the market we are analyzing. As telecommunications markets become increasingly multidimensional (both horizontally and vertically), attempting to apply economic first principles (i.e., defining the relevant markets, evaluating the elasticities of supply and demand, identifying barriers to entry, etc.) to analyze the power in, and performance of, telecommunications markets initially may be frustrating to both neophytes and old hands alike. The purpose of this article is to try to highlight some of the ways the 1996 Act may change the structural and behavioral characteristics of telecommunications markets. As explained herein, correctly identifying the structural characteristics of telecommunications markets, post-1996 Act, is the key to determining accurately whether firms are - or can - engage in some kind of strategic, anticompetitive conduct (e.g., collusive behavior, raising rivals' costs, price squeezes, erecting barriers to entry, etc.) that warrants intervention by the courts or regulators.
Keywords: Telecommunications, competition, 1996 act, market definitions
JEL Classification: K23, L5, L10, L50, L96, O33, O38
Suggested Citation: Suggested Citation