Divestiture policy considerations in an information services world

Abstract

The ‘line of business’ restrictions imposed upon the local Bell operating companies after their divestiture from AT&T were justified as necessary to prevent the undue exercise of market power in local exchange service through cross-subsidization or discriminatory tactics. However, these restrictions are widely viewed as impeding the provision of ‘information services’ by the BOCs. The author investigates here the usefulness of alternative rules to police against this conduct — such as ex post antitrust enforcement, regulatory reform such as ‘price caps’ and ‘open network architecture’ policies, accounting rules including incremental costs test, and tests in the antitrust literature designed to detect and deter predatory conduct. He concludes with speculation as to alternate causes for the lack of development of information services markets.