Networks in Telecommunications: Economics and Law

Article Source: Cambridge University Press, June 2009
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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Most traditional approaches to regulation for communications networks are outdated.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.


Key Takeaways:
  • 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  • Traditional regulation was supported by four outdated concerns.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.



Christopher Yoo

About Christopher Yoo

Christopher Yoo has emerged as one of the nation’s leading authorities on law and technology. His research focuses on how economic theories of imperfect competition are transforming the regulation of the Internet and other forms of electronic communications. He has been a leading voice in the “network neutrality” debate that has dominated Internet policy over the past several years. He is also pursuing research on copyright theory as well as the history of presidential power. He is the author (with Daniel F.

Daniel F. Spulber

About Daniel Spulber

Daniel F. Spulber is the Elinor Hobbs Distinguished Professor of International Business and Professor of Strategy at the Kellogg School of Management, Northwestern University. He is also Professor of Law (Courtesy) at the Northwestern University Pritzker School of Law. His research is in antitrust, technology and innovation, intellectual property, platforms and two-sided markets, industrial organization, international economics, management strategy, and law.