Local Telephone Service Research Articles

A broadband integrated time series (BITS) for longitudinal analyses of the digital divide.

To evaluate actions taken to implement the Telecommunications Act of 1996, the primary goal of which was to foster competition in the industry, the FCC created a standardized form (Form 477) to collect information about broadband deployment and competition in local telephone service. These data represent the best publicly available record of broadband provision in the United States. Despite the potential benefits offered by this database, there are several nuances to these data related to shifting geographies and reporting requirements that uncorrected, prevent them from being used as an uninterrupted time series for longitudinal analyses. Given the analytical challenges associated with the FCC Form 477 data, the purpose of this paper is to present a solution to the fragmented nature of these data which prevents meaningful longitudinal analyses of the digital divide. Specifically, this paper develops and describes a procedure for producing an integrated broadband time series (BITS) for the last decade (2008–2018). This includes the procedures for using these data, their value to social and economic analysis, and their underlying limitations. The core contribution of this paper is the creation of data infrastructure for investigating the evolution of the digital divide.

The logic of demand-side diversification: Evidence from the US telecommunications sector, 1990–1996

The logic of demand-side diversification articulated herein explains that a firm's demand-side strategic assets motivate its choice to diversify into an industry whose production function warrant possession of different supply-side strategic assets. The concept of demand-side relatedness, which underpins the logic of demand-side diversification, clarifies the conditions under which a firm's demand-side strategic assets provide it with the motivation to explore opportunities for realizing consumer synergies. We invoke this logic to explain the observed variation in the decision of monopoly local telephone service providers to diversify into the competitive long distance telephone services markets in the U.S. during 1990–1996. We find that the likelihood of a monopoly local telephone company to diversify into the long-distance services market within its area of franchise increases in the (a) quality of its customer-base for local telephony, and (b) competitive intensity of the market for long-distance services.

An unsung success story: A forty-year retrospective on U.S. communications policy

This paper looks back at forty years of U.S. communications policy, and concludes that all of the challenges that were salient when Telecommunications Policy published its first issue—the lack of competition in CPE, long distance, local telephone service, television networks, and multichannel video program distribution—have essentially been addressed. The other technology that has grown in importance since 1976—the Internet—is widely regarded as a raging success. Although no history is completely uniform, the past forty years illustrates the key considerations underlying the choice between whether to impose access regulations or whether to rely on facilities-based competition. Moreover, the paper considers the important role that U.S. courts have played in promoting competition and consumer welfare. In many cases, timely judicial intervention has forced regulators to retreat from positions that protected incumbents and limited competition. The paper concludes with outlooks on new issues and debates that will continue to arise.

Estimating the impact of low-income universal service programs

This policy study uses U.S. Census microdata to evaluate how subsidies for universal telephone service vary in their impact across low-income racial groups, gender, age, and home ownership. Our demand specification includes both the subsidized monthly price (Lifeline program) and the subsidized initial connection price (Linkup program) for local telephone service. Our quasi-maximum likelihood estimation controls for location differences and instruments for price endogeneity. The microdata allow us to estimate the effects of demographics on both elasticities of telephone penetration and the level of telephone penetration. Based on our preferred estimates, the subsidy programs increased aggregate penetration by 6.1% for households below the poverty line. Our results suggest that automatic enrollment programs are important and that Linkup is more cost-effective than Lifeline, which calls into question a recent FCC (2012) decision to reduce Linkup subsidies in favor of Lifeline. Our study can inform the evaluation of similar universal service policies for Internet access.

Regulatory bias in the price structure of local telephone service

This article combines a discrete choice model of demand for residential local telephone access and an optimal price regulation model to estimate the welfare weights that state regulators implicitly place on consumers with different incomes and locations. I find no evidence of a bias towards rural consumers on average, but the relative weight on low income consumers in a geographic area can vary as a function of the proportions of rural and poor population and the political characteristics of the regulator. I also measure the welfare consequences of deviating from total consumer surplus maximization and disconnecting prices from costs.

Estimating the Impact of Low-Income Universal Service Programs

This policy study uses U.S. Census microdata to evaluate how subsidies for universal telephone service vary in their impact across low-income racial groups, gender, age, and home ownership. Our demand specification includes both the subsidized monthly price (Lifeline program) and the subsidized initial connection price (Linkup program) for local telephone service. Our quasimaximum likelihood estimation controls for location differences and instruments for price endogeneity. The microdata allow us to estimate the effects of demographics on both elasticities of telephone penetration and the level of telephone penetration. Based on our preferred estimates, the subsidy programs increased aggregate penetration by 6.1% for low-income households. Our results suggest that Linkup is more cost-effective than Lifeline and that auto-enroll policies are important, which calls into question a recent FCC 2012) decision to reduce Linkup subsidies in favor of Lifeline. Our study can inform the evaluation of similar universal service policies for Internet access.

Skating Toward Deregulation: Canadian Developments

I. INTRODUCTION II. THE CRTC FORBEARANCE PROCEEDINGS A. Local Telephone Service B. VoIP Forbearance III. THE PARTIES A. Industry Participants B. Telecommunications Policy Review Panel C. Competition Bureau IV. THE GOVERNOR IN COUNCIL CUTS TO THE CHASE V. ECONOMIC COMMENTS AND CRITIQUES A. Regulation Within Markets B. Measuring Potential Share C. Service Market Definition D. Geographic Market Definition E. Share Tests and Strategic Responses F. Targeted Low Prices G. Defining Dominance H. Building Access I. Timing of Intervention J. Regulated Conduct VI. CONCLUSION I. INTRODUCTION Despite extensive deregulation in the telecommunications sector, local voice service has proven to be the last and most difficult market to deregulate. Perhaps the most extensive steps toward deregulation of this last stage are being taken in Canada. In April 2006, the Canada Radio-Television and Telecommunications Commission (CRTC) decided it was prepared to forbear from regulating the local voice service provided by the incumbent local exchange carder (ILEC), if the ILEC could show it had lost twenty-five percent of its share in a relevant market defined by both product (including voice-over Internet protocol or VoIP, excluding wireless) and geography (primarily the census metropolitan area or CMA). (1) ILECs were also prohibited from efforts to winback customers who had switched to competitors in the prior three months, unless the ILEC had lost twenty percent of its market. (2) This decision followed a 2005 CRTC decision not to deregulate ILEC VoIP service. (3) The CRTC did not have the last word. Shortly after its local forbearance decision, the Cabinet Ministers, referred to in Canada as the Governor in (4) of the recently established conservative government, issued an Order in Council requesting that the CRTC reconsider its VoIP decision. (5) The CRTC declined to forbear, claiming that VoIP was in the same market as regular voice service, which it was also refusing to forbear, although it did propose adopting smaller market share loss tests for forbearance and winback. (6) The Cabinet was apparently not satisfied, leading in September of 2006 to an order reversing the CRTC's VolP decision. (7) Going further, in December 2006 the Minister of Industry recommended to the Cabinet that it overrule the CRTC and order forbearance for residential service where there were three nonaffiliated facilities-based providers, two of which (including the ILEC) relied on fixed wires. (8) Business service would be forborne with only the two fixed-line providers. (9) This proposal was adopted by the Governor in in April 2007. (10) These developments raise a number of economic questions to explore, including the following issues: Regulation within markets: Should an incumbent's substitute service for its regulated service necessarily also be regulated when there may be multiple and more prominent providers of the substitute? Measuring potential share: An issue with share tests is determining the size of the likely market open to digital voice entrants. Should it be high volume customers who would get service at lower prices by switching to a VolP provider? Service market definition: To what extent is wireless in the market for wireline service? Would a weighting scheme be appropriate? Geographic market definition: The CRTC and Competition Bureau (Bureau) accepted that because consumers would not regard a telephone at some other location as a substitute for a telephone at their location, the relevant geographic market is the location. Other geographic market definitions were defended as mere aggregations of convenience. Is this sensible? Share tests and strategic responses: Might basing forbearance on market share introduce perverse effects on both incumbents and entrants? …

How Does the Experience of U.S. Telecommunications Regulation Inform the Forced Sharing of Intellectual Property Rights under Global Competition Law?

Competition authorities in foreign jurisdictions have recently adopted or are considering guidelines on applying competition law to intellectual property rights (IPR). A common concern that certain exercises of IPR can restrict competition underlies IPR provisions that would enable competition authorities to compel holders of IPR to license their IP at regulated royalties. The experience of telecommunications regulation in the United States, from the AT&T divestiture in the early 1980s to the implementation of the Telecommunications Act of 1996, illustrates the potential harm to competition and innovation that such forced-sharing policies would cause. The AT&T divestiture was a costly exercise that prevented or delayed the introduction of new services. Forced sharing of incumbents’ network elements at regulated rates under the Telecommunications Act reduced investment by both incumbents and entrants. Ironically (yet predictably), the competition for local telephone service that the Act sought but failed to foster was provided by wireless and cable operators, which were deliberately left unregulated and thus had both the incentive and means to upgrade and expand their networks to handle mass volumes of voice and data communications. The failure of forced sharing to promote competition and innovation counsels competition authorities to proceed with caution when using competition law to regulate IPR.

The Effects of Legacy Pricing Regulation on Adoption of Broadband Service in the United States

We examine and document the effect of policy-relevant factors on broadband adoption. We focus on the role of the price of basic local service on broadband adoption, to determine whether and to what extent legacy telephone policies and associated pricing distortions interfere with the contemporary goal of increased broadband adoption. Legacy universal service policy suppressed basic local telephone rates for residential customers in some areas to below-cost levels, subsidized by a variety of other revenue sources, including switched access revenues, prices for non-basic features, and business rates. The economic theory supporting this policy was that lower prices for basic local service would encourage adoption of basic local service, encouraging universal connection to the public switched telephone network. Today, however, there is effectively universal subscription to some form of local telephone service, which may include wireless or wireline services that are provided at unregulated prices; and policy goals are transitioning away from promoting basic local service to promotion of universal broadband adoption.We hypothesize that subsidized prices for basic residential services depress broadband adoption decisions. There are two reasons that we anticipate such an effect. First, broadband service and stand-alone traditional voice service are economic substitutes insofar as consumers can use broadband for voice service by purchasing an over-the-top VoIP service. Second, some customers may purchase a stand-alone voice line only or primarily for dial-up Internet access, for which broadband service is a substitute. Hence, for both reasons, we would expect to find a positive relationship between the price of basic local service and broadband adoption, meaning that where basic local service prices are lower, broadband adoption is lower. Intuitively, the logic is that, for a given price of broadband, the higher is the price of stand-alone voice service, the lower is the price hurdle to adopting broadband instead. We test this theory using quarterly household-level data from the first quarter 2006 through the second-quarter 2010 for over 70,000 household observations. The data are from the nationwide TNS surveys and bill samples. Using a multinomial logit specification, we find that higher prices for basic local service are in fact associated with higher rates of broadband adoption, controlling for availability of broadband service, broadband expenditures, household income, age of the head of household, size of household, population density of the household’s location, race, and other factors. We find that the demographic variables have largely the expected effects consistent with the literature. We also find that once other demographic and price variables are controlled for, there is not a “rural” divide - that is, a household’s propensity to adopt broadband service is higher, all else equal, in less densely populated areas, controlling for income, broadband availability, and other factors. Our results regarding the pricing variables are consistent with the hypothesis that promoting legacy policy goals of universal voice service by holding retail prices of basic local service artificially low impedes the achievement of current policy goals of universal broadband adoption. We believe our results are important because, unlike the numerous demographic variables that are known to be correlated with broadband adoption, the price of basic local service is, in many areas, subject to regulatory control and is therefore a policy variable. Our results suggest that relieving restrictions on prices of basic local service would promote the federal policy of universal broadband adoption.

The Effects of Liberalizing Price Controls on Local Telephone Service: An Empirical Analysis

In recent years, twelve U.S. states have liberalized price controls on basic telephone services, and several others are considering doing so. To assess the impact of these changes, we collected and analyzed a comprehensive data set on basic telephone prices and on the specific characteristics of price regulation in 95 cities. Our analysis demonstrates that the removal of price controls on basic telephone service has, if anything, led to lower rates, indicating that competition has developed to the point where price controls are no longer necessary. Given well-documented evidence of the distortions caused by unnecessary price controls, and the benefits of liberalization for consumers in particular and economic growth overall, we conclude that states should expedite the liberalization of price controls on basic telephone service.

Regulatory Bias in the Price Structure of Local Telephone Services

This article combines a discrete choice model of demand for residential local telephone access and an optimal price regulation model to estimate the welfare weights that state regulators place on consumers with different incomes and locations. I find no evidence of a bias towards rural consumers on average, but the relative weight on low income consumers in a geographic area can vary as a function of the proportions of rural and poor population and the political characteristics of the regulator. I also measure the welfare consequences of deviating from total consumer surplus maximization and disconnecting prices from costs.

The Effects of Legacy Pricing Regulation on Adoption of Broadband Service in the United States

We focus on the role of the price of basic local telephone service on broadband adoption, to determine whether and to what extent overlapping legacy telephone policies interfere with the contemporary goal of increased broadband adoption. The analysis uses nationwide quarterly household-level survey data from 54,269 households. Using a multinomial logit specification, our key result is that higher prices for basic local service are associated with higher rates of broadband adoption, controlling for broadband availability, household income, age of the head of household, size of household, population density of the household’s location, race, and other factors.

Statistical Analysis of VoDSL Technology for the Efficiency of Listening Quality of 640k/640k

INTRODUCTION The market for VoDSL loops to provide broadband services is currently experiencing explosive growth as the preferred last-mile deployment method for integrated communications providers in United States. Due to the explosiveness of the Internet and the massive data traffic through network convergence of voice and data technologies, VoDSL came into existence (Franz, 2000). VoDSL service has the capability to provide the customers with converged voice and data, including local and long distance telephone service, in addition to high speed Internet access on a single DSL copper line. The dial-up modem has in the past represented the means of connectivity for on-line access and Internet access. Enterprise systems have since migrated away from 56K dial-up to a faster methodology of communication. This move was necessitated as a result of the extensive copper networks, owned by exchange carriers. As the Digital Subscriber Line (DSL) continues its emergence as the choice of transportation for high speed data over existing telephone lines, enterprise systems are challenged on how to converge and maximize voice calls and high speed data over these same lines (Opara, 2004). As businesses continue to maneuver in the 21st century competitive environments, enterprise systems will thrive for excellence on how their network will remain effective, efficient, and reliable, while maintaining a relatively low overall cost of doing business. This study focuses on the use of the Asymmetric Digital Subscriber Lines (ADSL) technology, because it provides a life-line capability. This means that if there is power loss at any giving time, one telephone line will still be functional. This is because the technology has a lower bandwidth as the system travels upstream as compared to the downstream movement. Further, the technology transmits a high bit rate data in the downwards direction from the central office (CO) to the subscriber (downstream), with typical bit rates from 1.5 to 8 Mb/s, and lower bit rate data in the reverse (up) direction from the subscriber to the CO (upstream), with bit rates from 64 to 640 Kb/s (ANSI 1995). ADSL is used for asymmetric services to residential and small office home office (SOHO) customers. This paper will show outcomes that can be used in evaluating VoDSL solutions that offers multiple voice connections simultaneously with data onto the high speed digital line offered by an ADSL line. The results are based on the V/LQ of VoDSL. After the literature review, we present the description of the network architecture for V/LQ test setup. Then, we have discussions on the subscriber loop plant noise, concludes with the results of the tests performed. LITERATURE REVIEW Andersen (2007) found evidence that asymmetric DSL (also known as ADSL) has gained substantial interest in residential, small and medium size enterprise markets as a convenient way to gain access to high speed internet services. The reason is the continuous drive of enterprise systems toward voice/data convergence with the goal of reducing overall network usage costs. Finweek (2008) reported that VoDSL is a simplified voice solution effortlessly integrating with the provider's existing connection to the PSTN (Public Switched Telephone Network). Earlier studies found that convergence of voice and data in telecommunications is not a new paradigm, however, both ATM and IP or IP over ATM protocols are now used as technologies for convergence networking since both enhances lower network, operational and maintenance cost (Opara, 2004; Galli & Kerpez, 2002). Most recent studies (Andersen, 2007), found evidence that VoDSL technology has a similar architecture to the legendary public switch telephone network (PSTN). The studies summarized by stating that this technology is a promising breakthrough to the so-called next generation networks (NGNs). …

More than a Lifeline: Low-Income Households’ Telecommunications Preferences

Florida’s Lifeline program is part of a nationwide program to increase the availability of telecommunications services to low-income households by providing a credit to monthly recurring charges for local telephone service. In Florida, households can receive up to a $13.50 discount on their monthly local phone bills. The Federal Communications Commission (FCC) established the Lifeline program in the belief that low-income households find landline local telephone service to be essential for their social and economic livelihoods, and that a discount on the price for landline telephone service was needed to make the service affordable. There is mounting evidence that these assumptions do not hold true today. In 2005, about 90 percent of low-income households in Florida subscribed to landline telephone service even though only about 13 percent of the households eligible for Lifeline took the discount. Furthermore, about half of the low-income households were purchasing cellular phone service. We undertake this study to better understand low-income households’ choices with respect to communications services and participation in Lifeline. We employ surveys and statistical analyses to study Floridians’ participation in Lifeline and their choices for communications services.

Public Policy and Entrepreneurship: The Development of the Competitive Local Telephone Service Industry - Executive Summary

In this dissertation, I examine how political environments influence industry structure and entrepreneurial opportunities following deregulation. Within the competitive local exchange carrier (CLEC) industry, which was created by the federal Telecommunications Act of 1996, I find that founding rates of CLECs were higher in states with more experience with incentive-based regulation and in those states with new governors or new commissioners. I also find that states were attractive expansion targets when their political and regulatory characteristics were similar to those of a CLEC's founding state and when they had new governors or new commissioners. Together, my findings support my argument that a state's current policy is built upon its previous policies and that changes in political leadership can serve as punctuating moments that stimulate competition and industry development.

Performance Analysis of CDMA WLL Systems with Imperfect Power Control and Imperfect Sectorization

Wireless local loop (WLL) provides reliable, flexible, and economical access to the local telephone service using radio technology in the place of traditional wireline. In this paper, an analytical model is derived to evaluate the effect of both imperfect power control and imperfect sectorization on the performance of code division multiple access (CDMA) WLL systems. The results show that the capacity degradation, due to imperfect power control, is about 25.8% and 11.5% for single cell and multiple cell systems, respectively. Increasing the overlapping angle from to causes the capacity gain to decrease from 6 to 5.53, while the corresponding sectorization efficiency drops from 100% to 92.3%.

Shenandoah Telecommunications Co.

AbstractCommunications (MIC: SIC: 4813 NAIC: 517110)Shenandoah Telecommunications is a telecommunications holding company that, through its operating subsidiaries, provides both regulated and unregulated telecommunications services to end‐user customers and other communications providers in the southeastern U.S. Co.'s subsidiaries provide local exchange telephone services and wireless personal communications services, as well as cable television, video, Internet and data services, long distance, sale of telecommunications equipment, fiber optics facilities, and leased tower facilities. As of Dec 31 2007, Co. had six segments: Wireless Personal Communications Services, Telephone, Converged Services, Mobile, Cable Television and Other.

Quantifying the benefits of entry into local phone service

Local telecommunications competition was an important goal of the 1996 Telecommunications Act. We evaluate the consumer welfare effects of entry into residential local telephone service in New York State using household‐level data from September 1999 to March 2003. We address the prevalence of nonlinear tariffs by developing a discrete/continuous demand model that allows for service bundling and unobservable provider quality. We find that the average subscriber to the entrants' services gains a monthly equivalent of $2.33, or 6.2% of her bill, in welfare from competition. These gains accrue primarily from firm differentiation and new plan introductions rather than from price effects.

Shenandoah Telecommunications Co.

AbstractCommunications (MIC: SIC: 4813 NAIC: 517110)Shenandoah Telecommunications is a telecommunications holding company that, through its operating subsidiaries, provides both regulated and unregulated telecommunications services to end‐user customers and other communications providers in the southeastern U.S. Co.'s subsidiaries provide local exchange telephone services and wireless personal communications services, as well as cable television, video, Internet and data services, long distance, sale of telecommunications equipment, fiber optics facilities, and leased tower facilities. As of Dec 31 2007, Co. had six segments: Wireless Personal Communications Services, Telephone, Converged Services, Mobile, Cable Television and Other.

Shenandoah Telecommunications Co.

AbstractCommunications (MIC: 10.1 SIC: 4813 NAIC: 517110)Shenandoah Telecommunications is a telecommunications holding company that, through its operating subsidiaries, provides both regulated and unregulated telecommunications services to end‐user customers and other communications providers in the southeastern U.S.. Co.'s subsidiaries provide local exchange telephone services and wireless personal communications services, as well as cable television, video, Internet and data services, long distance, sale of telecommunications equipment, fiber optics facilities, and leased tower facilities. As of Dec 31 2007, Co. had six segments: Wireless Personal Communications Services, Telephone, Converged Services, Mobile, Cable Television and Other.