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The competitive effects of line‐of‐business restrictions in telecommunications
Author(s) -
Arrow Kenneth J.,
Carlton Dennis W.,
Sider Hal S.
Publication year - 1995
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090160405
Subject(s) - incentive , deterrence theory , market power , business , industrial organization , line of business , line (geometry) , power (physics) , economics , commerce , microeconomics , marketing , business model , law , electronic business , business relationship management , physics , quantum mechanics , political science , monopoly , geometry , mathematics
We review the original rationale for the line‐of‐business restrictions faced by the RBOCs and discuss changes in the conditions that motivated them. These changes include: (1) reduced incentives for local exchange carriers (LECs) to shift costs from unregulated to regulated businesses; (2) improved deterrence and monitoring of discrimination in providing network access; and (3) recognition that antitrust laws apply to abuse of market power in local exchange. We also analyze trends in prices charged by RBOCs and other LECs which suggest that the opportunity to engage in cost shuting is of little or no significance today. We conclude that eliminating the remaining line‐of‐business restrictions is not likely to raise significant new competitive concerns but consumers are likely to benefit from entry by RBOCs into now‐prohibited businesses, many of which are highly concentrated.