Entry Policy in Local Telecommunications: Iowa Utilities and Verizon

Abstract

The Telecommunications Act of 1996 requires, among other things, that incumbent local telephone carriers lease parts of their telephone networks to would-be rivals. 1 If you have children, you can easily imagine the difficulties inherent in this approach; mandated sharing is often contentious when forced upon young kids and is no easier as applied to firms with strong, contradictory interests. These problems are exacerbated in the telecommunications setting by imprecision in the rules of the game. As Justice Scalia put it AT&T Corp. v. Iowa Utilities Board, 2 “[i]t would be gross understatement to say that the Telecommunications Act of 1996 is not a model of clarity. It is in many important respects a model of ambiguity or indeed even self-contradiction.” 3 However complicated the legal provisions, the intuition behind them is straightforward: the purpose of mandatory sharing is to facilitate competition. Without mandatory sharing, a competitor can enter the market only if it can either cut a deal with an existing telephone company or build its own network from the ground up. With mandatory sharing, by contrast, a competitor has a third option: it can enter the