IDEAS home Printed from https://ideas.repec.org/p/ste/nystbu/98-08.html
   My bibliography  Save this paper

The Telecommunication Act of 1996 and its Impact

Author

Listed:
  • Nicholas Economides

Abstract

This paper analyzes the effects on the implementation of the Telecommunications Act of 1996 ("Act") on US telecommunications markets and is based on my forthcoming book with the same title. The Act is a milestone in the history of telecommunications in the United States. Coming 12 years after the breakup of AT&T, the Act attempts to move all telecommunications markets toward competition. The Act envisions competition in all telecommunications markets, both in the markets for the various elements that comprise the telecommunications network, as well as for the final services the network creates. Building on the experience of the long distance market, which was transformed from a monopoly to an effectively competitive market over the last 12 years, the Act attempts to promote competition in the hitherto monopolized local exchange markets. The Act recognizes the telecommunications network as a network of interconnected networks. Telecommunications providers are required to interconnect with entrants at any feasible point the entrant wishes. Most importantly, the Act requires that incumbent local exchange carriers ("ILECs") (i) lease parts of their network (unbundled network elements) to competitors "at cost"; (ii) provide at a wholesale discount to competitors any service the ILEC provides; and (iii) charge reciprocal rates in termination of calls to their network and to networks of local competitors. Moreover, the Act requires that ILECs that came out of the Bell System meet a number of requirements, including a public interest test, before they may enter into the long distance market. Thus, the Act provides some safeguards against the export of ILEC monopoly power to other parts of the network. Numerous legal challenges to the Act and its implementation have been raised by the ILECs resulting in very slow implementation of the Act, and, in many cases, in no substantial implementation of the provisions of the Act. Thus, more than two years after the passage of the Act, there is very little entry and competition in local exchange markets. In response to the apparent failure of the implementation Act, there has been a wave of mergers in the US telecommunications industry.

Suggested Citation

  • Nicholas Economides, 1998. "The Telecommunication Act of 1996 and its Impact," Working Papers 98-08, New York University, Leonard N. Stern School of Business, Department of Economics.
  • Handle: RePEc:ste:nystbu:98-08
    as

    Download full text from publisher

    File URL: http://raven.stern.nyu.edu/networks/98-08.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
    2. Nicholas Economides & Lawrence J. White, 1995. "Access and Interconnection Pricing: How Efficient is the Efficient Component Pricing Rule?," Working Papers 95-04, New York University, Leonard N. Stern School of Business, Department of Economics.
    3. Hausman, Jerry & Tardiff, Timothy & Belinfante, Alexander, 1993. "The Effects of the Breakup of AT&T on Telephone Penetration in the United States," American Economic Review, American Economic Association, vol. 83(2), pages 178-184, May.
    4. MacAvoy, Paul W, 1995. "Tacit Collusion under Regulation in the Pricing of Interstate Long-Distance Telephone Services," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 147-185, Summer.
    5. Nicholas Economides, 1998. "Raising Rivals' Costs in Complementary Goods Markets: LECs Entering into Long Distance and Microsoft Bundling Internet Explorer," Working Papers 98-03, New York University, Leonard N. Stern School of Business, Department of Economics.
    6. Nicholas Economides, 1998. "U.S. Telecommunications Today," Working Papers 98-04, New York University, Leonard N. Stern School of Business, Department of Economics.
    7. Economides, Nicholas, 1998. "The incentive for non-price discrimination by an input monopolist," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 271-284, May.
    8. Milton L. Mueller, 1997. "Universal Service," Books, American Enterprise Institute, number 53006.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nicholas Economides, 2003. "Telecommunications Regulation: An Introduction," Working Papers 03-22, New York University, Leonard N. Stern School of Business, Department of Economics.
    2. Nicholas Economides, 2006. "Competition Policy in Network Industries: An Introduction," Chapters,in: The New Economy and Beyond, chapter 5 Edward Elgar Publishing.
    3. de Bijl, P.W.J. & Peitz, M., 2004. "Unbundling the Local Loop : One-Way Access and Imperfect Competition," Discussion Paper 2004-025, Tilburg University, Tilburg Law and Economic Center.
    4. Ying Fan & Mo Xiao, 2015. "Competition and subsidies in the deregulated US local telephone industry," RAND Journal of Economics, RAND Corporation, vol. 46(4), pages 751-776, October.
    5. Mark A. Jamison, 2011. "Liberalization and Regulation of Telecoms, Electricity, and Gas in the United States," Chapters,in: International Handbook of Network Industries, chapter 21 Edward Elgar Publishing.
    6. Giovannetti, Emanuele, 2002. "Interconnection, differentiation and bottlenecks in the Internet," Information Economics and Policy, Elsevier, vol. 14(3), pages 385-404, September.
    7. Jerbashian, Vahagn, 2015. "The telecommunications industry and economic growth: How the market structure matters," Economic Modelling, Elsevier, vol. 51(C), pages 515-523.
    8. Majumdar, Sumit K. & Yaylacicegi, Ulku & Moussawi, Rabih, 2012. "Mergers and synergy: Lessons from contemporary telecommunications history," Telecommunications Policy, Elsevier, vol. 36(2), pages 140-154.
    9. Yilmaz, Kamil, 2000. "Türk telekomünikasyon sektöründe reform: Özelleştirme, düzenleme ve serbestleşme
      [Reform in the Turkish telecommunications sector: Privatisation, regulation, and liberalisation]
      ," MPRA Paper 66244, University Library of Munich, Germany.
    10. repec:eee:jebusi:v:94:y:2017:i:c:p:15-31 is not listed on IDEAS
    11. repec:spr:fininn:v:1:y:2015:i:1:d:10.1186_s40854-015-0004-7 is not listed on IDEAS
    12. Majumdar, Sumit K., 2016. "Debt and communications technology diffusion: Retrospective evidence," Research Policy, Elsevier, vol. 45(2), pages 458-474.

    More about this item

    Keywords

    telecommunications; regulation; competition;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ste:nystbu:98-08. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Viveca Licata). General contact details of provider: http://edirc.repec.org/data/ednyuus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.