Competition in Local Telecommunications

Abstract

The Telecommunications Act of 1996 created a framework for competition in local telecommunications. Under its rules and under the jurisdiction of state regulatory authorities, competitive local telephone companies were to gain access to some or all parts of the incumbent's network through known wholesale tariffs and offer retail local telephone service. As customers adopt other technologies for communications–mobile wireless service, broadband for email, messaging, and information retrieval–additional competitive pressures are put on the core voice telephone market. The substitution of usage and access from local telephony to other modes of communication is regarded as intermodal competition and is the subject of this paper. This study concerns local telecommunications competition between incumbent and competitive service providers in the United States. In addition to measuring competition from within the wireline market, we find significant intermodal competitive impacts resulting from wireless and high-speed development. We report empirical results from an econometric model that measures line loss impacts between carriers and the effects of wireless and high-speed services on the wireline market. The paper offers interpretation of the strategic and policy implications of these results.