1. Competition in the Telecommunications Industry*
07/16/96
Competition in the Telecommunications Industry
Gregory L. Rosston
Stanford Institute for Economic Policy Research *

2. Outline of Talk History Overview of Telecom Act Implementation*
07/16/96
Outline of Talk
History
Overview of Telecom Act Implementation
what were we thinking?
Competition
how it is affected by all of this.
If there is time, so may be a bit rushed. *

3. Why Do We Care About Competition?*
07/16/96
Why Do We Care About Competition?
Long Distance $50 Billion (net of access)
Local $100 billion
Internet $10 billion (and growing!)
Inefficiencies and innovation
1. Big numbers.
2. Important Sector of the Economy alone
3. Key input into lots of other industries and changing the way we do business. E-Loan 4. *

5. Simplified Version of the Network*
07/16/96
Simplified Version of the Network
IXC POPs
End Office
End Office
CPE
CPE *

6. Network of Networks Nirvana*
07/16/96
Network of Networks Nirvana
Unbiased technology choice
Unbiased service choices
Meeting consumer demand
Interconnection is the key *

7. Triple Play Facilities-based Unbundled elements Resale*
07/16/96
Triple Play
Facilities-based
Depends on customer, area
Local
Exchange
Unbundled elements
40% discount
Platform approach
Resale
Immediate
15-25% discount *

8. Telecom Act Nirvana Universal Service Access Reform Interconnection
Long Distance
Entry

9. Symmetric vs. Asymmetric Termination Rates*
07/16/96
Symmetric vs. Asymmetric Termination Rates
Asymmetric cellular termination
Assume 1000 local minutes per month, 10% share.
Net termination payments of $27 per month per customer.
$0.00/min
Wireline
Cellular
$0.03/min *

10. Interconnection--What were we thinking?*
07/16/96
Interconnection--What were we thinking?
Leveling the playing field upwards
Dominant network vs. competing to garner network effects
Forward-looking economic costs *

11. What has happened? Moving with all due speed Jurisdictional fights or*
07/16/96
What has happened?
Moving with all due speed
Jurisdictional fights or ?
Act discusses negotiation. Sets up framework for what to do if negotiations fail. That should have been completed a long time ago. (9 months from date of Act). Just now getting some permanent rates.
Court challenges on a variety of fronts
GTE challenging (almost) every state hearing in court.
Others have been somewhat more circumspect because of need for future state cooperation.
Bill of attainder and 8th Circuit cases/ *

12. Local Rate Structure -- Kentucky

13. InterLATA Entry Economies of scope through bundling*
07/16/96
InterLATA Entry
Economies of scope through bundling
Incentive to open local market
Incentive to increase number of access minutes
Tauzin-Dingell
Value of one stop shopping
Cost savings through better use of networks.
Opening local competition. If no carrot, then harder to do. Look at differences with GTE
“Double marginalization” problem. B/c of imperfect competition *

14. RBOCs
IXC – IP Companies
AT&T
MCI/Worldcom
Sprint
Level 3
Others
Wireless Co.s
Verizon
Sprint
AT&T
Nextel
Cingular
Voicestream
Nextwave
CLECs
Covad
Northpoint
Rhythms XO
Winstar
Others
Cable Co.s
AT&T
AOL-TimeWarner
Comcast
Charter
Others