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The Role Of Differentiation Strategy In Local Telecommunication Entry And Market Evolution: 1999–2002

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  • SHANE GREENSTEIN
  • MICHAEL MAZZEO

Abstract

We examine the role of differentiation among competitive local exchange carriers (CLECs) in nearly 1,200 U.S. cities in 1999 and 2002, before and after a valuation crash affecting communications firms. We test and reject the null hypothesis of homogeneous competitors. We also find strong evidence that differentiated CLECs account for both potential market demand and the business strategies of competitors when making their entry decisions. Finally, product heterogeneity in markets in 1999 helps predict how the structure of markets evolved through 2002. We conclude that the policy debate for local telecommunications regulation should account for differentiated behavior.

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  • Shane Greenstein & Michael Mazzeo, 2006. "The Role Of Differentiation Strategy In Local Telecommunication Entry And Market Evolution: 1999–2002," Journal of Industrial Economics, Wiley Blackwell, vol. 54(3), pages 323-350, September.
    • Handle: RePEc:bla:jindec:v:54:y:2006:i:3:p:323-350
    DOI: 10.1111/j.1467-6451.2006.00291.x
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    1. Shane Greenstein & Michael Mazzeo, 2003. "Differentiation Strategy and Market Deregulation: Local Telecommunication Entry in the Late 1990s," NBER Working Papers 9761, National Bureau of Economic Research, Inc.
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