Networks in Telecommunications: Economics and Law

Networks, the Internet, and Cloud Computing and Networks and Infrastructure

Article Snapshot


Daniel Spulber and Christopher Yoo


Cambridge University Press, June 2009


This book surveys the law and economics of communications networks.

Policy Relevance

Most traditional approaches to regulation for communications networks are outdated. New theories should emphasize the growth of competition and markets.

Main Points

  • Communications networks have grown in economic importance, while the configuration of networks, their design, pricing, and costs has changed drastically with technology.
    • Graph theory can be used to diagram the complex operation of networks.

  • Over time, regulation of networks has shifted from rate regulation, which controlled the prices that networks charged consumers, to access regulation, which controls the terms on which networks deal with competitors.

  • Traditional regulation was supported by four outdated concerns. These are natural monopoly, network effects, vertical integration, and fear of “ruinous competition.”
    • New technology has changed network costs and economics, and sustained competition between firms of equal size will benefit consumers more than most traditional regulation.

  • Networks will often offer open access and/or interconnect with one another because of market forces. There are basically five types of ways that networks can offer users and other networks access to their services.

  • The constitution limits some regulatory controls on the prices that one network charges another networks.

  • Today, regulatory regimes for networks include:
    • The Telecommunications Act of 1996.
    • Antitrust policy.
    • Federal Communications Commission rulings on broadband.
    • Controversial proposals for network neutrality rules.

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