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Regulation and the Vertically Integrated Firm: The Case of RBOC Entry into Interlata Long Distance

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  • Weisman, Dennis L
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    Abstract

    Congress is considering telecommunications reform legislation that would allow the Regional Bell Operating Companies (RBOCs) to enter the interLATA long-distance market. A concern is that a vertically-integrated RBOC would be able to discriminate against its rivals. A proposed remedy would require the RBOCs to reduce their access market share as a precondition to interLATA entry. We show formally that such a precondition likely contributes to higher long-distance prices and enhances the risk of discrimination. Furthermore, the lower the share of access profits retained by an RBOC, the weaker are its incentives to lower long-distance prices. Copyright 1995 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Regulatory Economics.

    Volume (Year): 8 (1995)
    Issue (Month): 3 (November)
    Pages: 249-66

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    Handle: RePEc:kap:regeco:v:8:y:1995:i:3:p:249-66

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    Cited by:
    1. David Mandy & David E. M. Sappington, 2004. "Incentives for Sabotage in Vertically Related Industries," Working Papers 0404, Department of Economics, University of Missouri, revised 16 Dec 2004.
    2. David Sappington & J. Sidak, 2003. "Incentives for Anticompetitive Behavior by Public Enterprises," Review of Industrial Organization, Springer, vol. 22(3), pages 183-206, May.
    3. Sappington, David E. M., 2003. "Regulating horizontal diversification," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 291-315, March.
    4. Mark Armstrong & David E.M. Sappington, 2006. "Regulation, Competition and Liberalization," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 325-366, June.
    5. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
    6. Prandini, Alberto, 2007. "Good, BETTA, best? The role of industry structure in electricity reform in Scotland," Energy Policy, Elsevier, vol. 35(3), pages 1628-1642, March.
    7. Flavio Menezes & John Quiggin & Tina Kao, 2012. "Optimal Access Regulation with Downstream Competition," Discussion Papers Series 473, School of Economics, University of Queensland, Australia.
    8. Foros, Oystein, 2004. "Strategic investments with spillovers, vertical integration and foreclosure in the broadband access market," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 1-24, January.
    9. Banerjee, Aniruddha & Dippon, Christian M., 2009. "Voluntary relationships among mobile network operators and mobile virtual network operators: An economic explanation," Information Economics and Policy, Elsevier, vol. 21(1), pages 72-84, February.
    10. Joan Calzada & Francesc Trillas, 2005. "The interconnection prices in telecomunications: from theory to practice," Hacienda Pública Española, IEF, vol. 173(2), pages 85-125, June.
    11. Lewis, Tracy R. & Sappington, David E. M., 1999. "Access pricing with unregulated downstream competition," Information Economics and Policy, Elsevier, vol. 11(1), pages 73-100, March.
    12. Bier, Christoph & Schmidtchen, Dieter, 2006. ""Golden-Gans"-Effekt, Preisdiskriminierungsgefahr und die Regulierung von Netznutzungsentgelten," CSLE Discussion Paper Series 2006-01, Saarland University, CSLE - Center for the Study of Law and Economics.
    13. Dennis Weisman & Michael Williams, 2001. "The Costs and Benefits of Long-Distance Entry: Regulation and Non-Price Discrimination," Review of Industrial Organization, Springer, vol. 18(3), pages 275-282, May.
    14. Nikogosian, Vigen & Veith, Tobias, 2011. "Vertical integration, separation and non-price discrimination: An empirical analysis of German electricity markets for residential customers," ZEW Discussion Papers 11-069, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    15. Christoph Bier & Dieter Schmidtchen, . "„Golden-Gans“-Effekt, Preisdiskriminierungsgefahr und die Regulierung von Netznutzungsentgelten," German Working Papers in Law and Economics 2006-1-1137, Berkeley Electronic Press.
    16. Weisman, Dennis L., 2001. "Access pricing and exclusionary behavior," Economics Letters, Elsevier, vol. 72(1), pages 121-126, July.
    17. Gert Brunekreeft, 2002. "Regulation and Third-Party Discrimination in the German Electricity Supply Industry," European Journal of Law and Economics, Springer, vol. 13(3), pages 203-220, May.
    18. Ming Chang, 1996. "Ramsey pricing in a hierarchical structure with an application to network-access pricing," Journal of Economics, Springer, vol. 64(3), pages 281-314, October.
    19. James Reitzes, 2008. "Downstream price-cap regulation and upstream market power," Journal of Regulatory Economics, Springer, vol. 33(2), pages 179-200, April.
    20. Brennan, Timothy, 2005. "Alleged Transmission Undersupply: Is Restructuring the Cure or the Cause?," Discussion Papers dp-05-50, Resources For the Future.
    21. David Mandy, 2007. "When Do Input Prices Matter For Make-Or-Buy Decisions?," Working Papers 0701, Department of Economics, University of Missouri.

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