TEL 310
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TEL 310
03/20 Intro to Telephone Regulation
Homework #2 returned
Midterm test returned
Proposal
Review: FCC and Broadcasting
Licensing
Content Regulation
Structural regulation
Intro to Telephone Regulation
- Telephone vs. Broadcasting
BroadcastingTelephone
Point to multi-pointPoint to point
No expectation of privacyExpectation of privacy
Supported by advertisingSupported by consumer
Competition on local levelLocal natural monopoly
Uses spectrumWireline use no spectrum
Limited com areasWorldwide comm.
Editorial discretionCommon carrier
- Other important characteristics of telephone:
Network externality
Economies of scale and Natural monopoly (p. 345)
"The costs of producing a unit of the good or service are declining over the normal range of consumer demand for the good or service"
--- Implication for regulation:
--- Natural monopoly and the lack of substitute
Telephone model of regulation: regulation of rate and service
- Simple Model of Telephone system (p. 346)
- Changes to the basic model
1). Microwave and satellite technology - implication for long distance services
2). Fiber optic cables and digital signal processing --- increase phone line capacity
3). Growth of cellular phone industry --- competition in the local market
5. The pre-Divestiture Bell System
Controls everything:
Customer Premises Equipment (CPE)
Switch and other telecom equipment
Local service
Long distance service
How did Bell initially achieve dominance in the telephone market? (p. 353-356)
1)Market division agreement with Western Union
2)Patents
3)Denial of interconnection to rivals
4)Control of superior long distance technology
- Cross-subsidies
Business vs. residential
Urban vs. rural
Long distance vs. local calls
Heavily vs. lightly used routes
- Universal Service
Veil and "universal service"
The 1934 Act and "universal service"
The meaning of "universal service" changed: from concern with efficiency to equity