Competition and ‘Local’ Communications: Innovation, Entry and Integration

Abstract

This paper suggests that the imminent introduction of new local access competition using existing new technologies should end any possibility of a natural monopoly in local exchange. The paper questions whether the fundamental economics of the local exchange really require regulation of local telephone service rather than the narrow regulation of interconnection. It also points out that technological development is sharpening competitive forces in practically all aspects of telecommunications. Moreover, the willingness of some local exchange providers to unbundle has laid the foundation for a further rollback of regulation in areas of the USA. Finally, the paper contends that regulatory lags require that regulation take a forward-looking perspective and attempt to deal with the industry as it will be, not as it was. Copyright 1995 by Oxford University Press.