Regulation of Broadband Telecommunications, the Principle of Regulating Narrowly Defined Input Bottlenecks...

Competition Policy and Antitrust, Networks, the Internet, and Cloud Computing and Networks and Infrastructure

Article Snapshot

Author(s)

William Rogerson

Source

University of Chicago Legal Forum, Vol. 2000, pp. 119-147, 2000

Summary

This paper asks how networks owned by telephone companies should be regulated to encourage broadband competition.

Policy Relevance

Telephone companies should be required to allow competitors to use parts of their network, the copper loops that carry traffic over local networks and connect to consumers’ homes, to help other broadband carriers compete and offer more broadband access.

Main Points

  • Full title: The Regulation of Broadband Telecommunications, the Principle of Regulating Narrowly Defined Input Bottlenecks, and Incentives for Investment and Innovation
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  • Traditional regulation that is based on the theory that prices should be based on costs is not well suited to innovative sectors.
    • Cost-based regulation discourages innovation.
    • Cost-based regulation was designed for monopolies, not competitive sectors.
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  • Consistent with this, generally, the FCC should not regulate broadband networks.
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  • The 1996 Telecommunications Act adopted a policy of requiring telecommunications carriers to offer competitors access to their network, which would not be a good permanent policy but which is defensible as part of a policy making a transition to more competition.
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  • The parts of the telecommunications network near consumers’ homes, the “copper loop”, can be used to provide broadband services without additional innovation and investment. Therefore, it would be less harmful to regulate this portion of the network.
    • This copper loop is a bottleneck because there are few alternate routes by which a broadband carrier may reach a consumer’s home. Other firms such as cable companies have failed to build enough alternatives to the telecommunications companies copper loops.
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  • Policymakers could spur broadband competition immediately by requiring telecommunications companies to offer competitors access to the local loops, basing the price of access on cost.
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  • This policy would focus innovation on other areas of the network.

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