Competition after Unbundling: Entry, Industry Structure and Convergence

Abstract

In the last few years, U.S. telecoms policy has shifted from encouraging the sharing of existing networks to facilitating the deployment of advanced communications networks. Given the large capital expenditures required for these networks, there can be only a few of such networks. In light of the natural forces that limit the number of facilities-based suppliers, it is vital for policymakers to investigate and implement rules that make markets more conducive to facilities-based entry, and eliminate any existing rules that discourage deployment. The purpose of this Policy Paper is to provide a simple conceptual framework that can be used to evaluate the effect of particular rules and regulation on the construction of advanced communications networks and the expansion of existing networks into new markets. We provide numerical examples and a number of applications to illustrate how the conceptual framework can be used to evaluate particular rules and regulations as to their effect on facilities-based entry. Applications include an analysis of convergence, regulated limitations on service offerings, the pernicious effects of cable franchising, and the potential for collusion.

Keywords: Entry, Market Concentration, facilities-based competition, inter-modal competition

JEL Classification: K23, L10, L50, L96, 031, O33, 038