Deregulating Telecommunications The Baby Bells Case for Competition

by Higgins, Richard S.; Rubin, Paul H.

• ISBN13: 9780471962953
• ISBN10: 0471962953
• Edition: 1st
• Format: Hardcover
• Copyright: 1996-09-20
• Publisher: Wiley

Summary

In 1984, the Department of Justice settled its antitrust case against AT&T. The agreement, embedded in the Modification of Final Judgment, led to a divestiture of the local telephone exchanges from AT&T to the Regional Bell Operating Companies (known as the Baby Bells ). This agreement gave unprecedented power over a major US industry to one man, Judge Harold Greene of the US District Court of the District of Columbia. The Baby Bells could not enter any line of business without approval from Judge Greene. With technological change it became increasingly desirable for the Baby Bells to enter different lines of business, but each attempt was subject to legal challenge and lengthy, costly litigation. In 1994, the Baby Bells mounted a major legal challenge to the Modification of Final Judgement (MFJ). As part of their strategy, they asked leading scholars in the field to examine the costs and benefits of the MFJ and provide evidence in the form of affidavits regarding its effect. Using a cost-benefit framework, the conclusion of the analysis is that the MFJ should be vacated and competition should be allowed in the industry. Deregulating Telecommunications draws together a group of leading practitioners and academics in the fields of regulation, industrial organisation and antitrust to explore: * A cost-benefit analysis of the 1984 AT&T antitrust settlement * Theoretical and empirical studies that analyse the results of the settlement from its inception in 1984 to 1994 * An explanation for the recent policy decisions to reduce the amount of regulation in telecommunications * Analysis vital to predicting the results of any deregulation in telecommunications in the future This book will prove invaluable to economists interested in telecommunications, as well as those interested in antitrust and in regulation.

Author Biography

Richard S. Higgins is the author of Deregulating Telecommunications: The Baby Bells Case for Competition, published by Wiley.

Paul Harold Rubin is an American economist and the Samuel Candler Dobbs Professor of Economics at Emory University. He was President of the Southern Economic Association in 2012-2013. He is also a research fellow at The Independent Institute.

Table of Contents

About the Contributors	vii	(6)
Introduction: An Overview of the Costs and Benefits of the AT&T Antitrust Settlement	xiii
R. S. Higgins
P. H. Rubin
PART ONE: THE BASIS FOR THE MFJ, 1984 AND 1994	1	(42)
1 The MFJ: An Imperfect Solution	3	(8)
P. Temin
2 Revisiting the Line-of-Business Restrictions	11	(10)
D. E. M. Sappington
3 The Competitive Effects of Line-of-Business Restrictions in Telecommunications	21	(22)
K. J. Arrow
D. W. Carlton
H. S. Sider
PART TWO: BENEFITS OF REMOVING THE MFJ LINE OF BUSINESS RESTRICTIONS	43	(106)
4 Vertical Integration and Regulation in the Telephone Industry	45	(4)
A. A. Alchian
5 The Regulation of Vertical Relationships in the U.S. Telecommunications Industry	49	(22)
R. W. Oliver
D. T Scheffman
6 The Benefits of Releasing the Bell Companies from the Interexchange Restrictions	71	(16)
P. S. Brandon
R. L. Schmalensee
7 Competition in Long-Distance and Telecommunications Equipment Markets: Effects of the MFJ	87	(20)
J. A. Hausman
8 Costs of Delay and Rent-Seeking Under the Modification of Final Judgment	107	(16)
P. H. Rubin
H. Dezhbakhsh
9 Realignment in Telecommunications	123	(26)
M. T. Maloney
R. E. McCormick
PART THREE: THE POTENTIAL COSTS OF REMOVING THE LINE-OF-BUSINESS RESTRICTIONS	149
10 Deterring Predation in Telecommunications: Are Line-of-Business Restraints Needed?	151	(12)
S. Gates
P. Milgrom
J. Roberts
11 BOC Manufacture of Telecommunications Equipment: An Assessment of Benefits and Competitive Risks	163	(12)
F. M. Fisher
R. J. Larner
M. Hunter
A. Salsbury Serrano
12 Expanded Competitiveness and Regulatory Safeguards in Local Telecommunications Markets	175	(18)
B. M. Mitchell
I. Vogelsang
13 The Effect of Enhanced Competition on the Equity Values of the Regional Bell Operating Companies	193	(10)
K. C. Green
K. M. Lehn
14 Sibling Rivalry: The Emergency of Competition Among the Baby Bells	203	(14)
W. F. Shughart II
15 Empirical Tests of the Cross-Subsidy and Discriminatory-Access Hypotheses in Vertically Integrated Telephony	217	(14)
F. S. McChesney
16 Empirical Tests of RBOC Leveraging and Cross-Subsidization	231
R. S. Higgins
M. J. McDonald