United States Telecommunications Industry Research Articles

How to Exploit Market Power: Horizontal Ownership Concentration and Network Access Pricing

This article reports an evaluation of the impact of horizontal ownership concentration on communications sector access pricing outcomes. Detailed historical data of postacquisition impacts on firms’ access revenue outcomes have enabled analysis for the entire local exchange sector of the United States telecommunications industry. The findings are (1) the sector’s horizontal ownership concentration process has caused key access-providing firms’ average access revenue ratios to be over 16 percent higher; (2) access revenue enhancements, through using market power, by entities belonging to larger groupings, have resulted in aggregate annual fiscal windfalls of between $5 and $6 billion; (3) these windfalls have accounted for between 4.5 and 5 percent of provider firms’ total revenues; (4) on average, each entity evaluated has received approximately between $120 and $150 million in incremental annual revenues via potential overcharge of access rates; and (5) United States telecommunications customers have incurred a between 6 and 7 percent overcharge on monthly bills, over several years, because network access charges have been higher, in part due to horizontal ownership concentration. Access charges are regulated, and horizontal ownership concentration-enhancing deals were allowed only after stringent institutional assessments. The resultant market power exploitation has led to the significant exploitation of United States telecommunications customers. Creation of substantial potential, and across-the-board, inflationary pressures and harm to consumers has been immense. Classic topics, such as access regulation and merger control, remain contemporary, demanding detailed attention, if digital technology is to be ubiquitous in humanity’s service. Concomitantly, key contemporary corporate governance concerns, relating to the emergence of horizontal ownership concentration patterns, also become apposite since the associated outcomes have innate major welfare impacts.

Assessing the Effectiveness of Cybersecurity Measures in the United States Telecommunications Industry: A Comprehensive Analysis

This research study assessed the effectiveness of cybersecurity measures in the United States telecommunications industry through a comprehensive analysis. Descriptive survey design was employed to establish a theoretical foundation and draw insights from existing scholarly articles, industry reports, and relevant cybersecurity frameworks. The analysis focused on historical cyber threat data and incidents within the telecommunications sector to identify prevalent threats and vulnerabilities. The literature review provided valuable insights into the challenges faced by the industry and the evolving landscape of cybersecurity. Quantitative data was collected through surveys administered to telecommunication companies operating in the United States. The surveys covered various aspects of cybersecurity practices, protocols, and incidents. The data collected from the surveys was analyzed to evaluate the effectiveness of existing cybersecurity measures in mitigating cyber threats. Additionally, qualitative insights and perspectives were gathered through interviews with key stakeholders, including cybersecurity experts, telecommunication industry professionals, and regulatory authorities. The findings of this study contribute to a better understanding of the state of cybersecurity in the United States telecommunications industry. The literature-based approach allowed for a comprehensive assessment of the industry's cybersecurity posture based on existing knowledge and research. The research outcomes provide valuable insights for telecommunication companies, policymakers, and regulatory authorities. By addressing the identified gaps and weaknesses, policymakers and regulatory authorities can implement targeted interventions to enhance cybersecurity practices. Telecommunication companies can leverage the research findings to strengthen their cybersecurity protocols and protect critical infrastructure. The research study demonstrates the importance of continuous evaluation and improvement of cybersecurity measures in the telecommunications industry. It highlights the need for ongoing collaboration between industry stakeholders, policymakers, and regulatory bodies to address the evolving cyber threat landscape effectively. Keywords: Cybersecurity, Measures, United States, Telecommunications Industry, Comprehensive Analysis.

The firm is dead; long live the firm: Classifying firm survival after mergers and acquisitions

AbstractIdentifying the surviving firms following mergers and acquisitions (M&A) presents challenges in organizational research. The paper offers a solution to this issue by examining prior research on M&A and firm survival to identify three empirically‐relevant criteria—strategic intent, corporate name retention, and top management team composition—and integrate them into a process‐driven typology of firm survival following M&A. To demonstrate the utility of this method, we apply this typology to an industry rich with M&A activity: the United States telecommunications industry.

Incentive Regulation and Capital Structure in Digital Networks: Theory, Evidence and Implications

Financing questions are important in assessing firms in regulated sectors, such as telecommunications, as they have high debt levels. Concomitantly, a regulatory innovation influencing firms behavior has seen ‘cost-plus’ rate of return regulation giving way to incentive-based ‘price-minus’ approaches, such as price caps where inflationary price increases may be awarded, subject to meeting a productivity target. The impacts of such regulatory transitions on firm leverage have not been conceptually or empirically evaluated. We analytically model whether the regulatory transition to a price caps regime, from a rate of return framework, would affect firms’ leverage. Thereafter, our proposition is evaluated with data for the United States telecommunications industry, the sector providing the digital carriage backbone for the American economy, to draw widely-applicable conclusions. Detailed granular time-series data allow assessment of the impact of regulatory change on incumbent local exchange companies’ leverage. This natural experiment format permits a salient issue examination, via generalizable evidence, given that communications technologies affect all aspects of our lives. We find that price cap regulated firms have had 39 percent lower leverage levels than firms regulated by the rate of return method. Hybrid or intermediate regulations have had no impact or positive impact on leverage. Leverage decline after price caps introduction would be motivated by efficiency considerations; nevertheless, after the introduction of competition, firms would not only need to cut costs to boost fiscal performance but also send entrants signals that low leverage levels would provide incumbents financial slack to tackle competition and protect markets.

Mergers and Wages in Digital Networks: a Public Interest Perspective

This article has examined the relationship between mergers and their impact on average per-person wages for incumbents, over long periods of institutional changes within the United States telecommunications industry, from a public interest perspective. We evaluate the relationship of mergers and wages across two differing periods; one, when the sector was completely regulated, and, the other, when competition was introduced after the Telecommunications Act of 1996. We treat mergers as endogenous and use treatment effects analysis to examine the relationship of mergers and wages. Having split the data set into data for regulated and deregulated periods, we find no impact of mergers on wages in the regulated period. In the deregulated period, however, between 1996 and 2001, we find a significant negative impact on mergers and wages. For firms experiencing mergers, real average wages per employee are a third lower than in non-merging firms. This suggests a post-merger cost-cutting approach by firms. Our before-and-after findings of wages declining after mergers, in the 1996 to 2001 period, lead us to conclude that the merger approvals given after the passage of TA 1996 will not have met public interest guidelines as per which merger outcomes ought to be fair to affected firms’ employees and stakeholders. Additionally, we suggest a resolution to the empirical puzzle, of half-negative and half-positive merger and wage outcome findings existing in the literature, by incorporating institutional context into our analysis to explain why during some periods of time the relationship of merger and wage outcomes may be positive and at other times may be negative.

Capital Structure and Mergers: Retrospective Evidence from a Natural Experiment

This analysis evaluates the impact of corporate debt in influencing mergers of local exchange companies in the United States telecommunications industry between 1988 and 2001. Firms’ financial structures significantly affect behavior and performance; yet no evidence has shown how firms’ financial structures influence their merger activities. The impact of corporate debt levels on the various mergers that took place during the merger wave in the sector is significantly negative for the first set of mergers carried out, and significantly negative, but with smaller impact, for the second set of mergers. The results support the idea that firms with high debt levels can be monitored carefully, precluding engagement in potentially-risky mergers so as to not engender negative financial outcomes.

Regulation, Institutional Disruption and Choice of Telecommunications Sector Capital Structure

The impact of transition from a rate of return to incentive regulation on choice of firm leverage levels in the United States telecommunications industry has been examined for the years 1988 to 200...

Mergers and Telecommunications Infrastructure Deployment

We retrospectively evaluate the impact of the various mergers of the local exchange companies in the United States telecommunications industry between 1988 and 2001 on technology investment levels. We use treatment effects modeling to evaluate major mergers in a sector where technology diffusion is important, and the approach accounts for selection bias and the endogenous nature of mergers. Our framework is based on behavioral theories of the firms and we use co-evolutionary and dynamic capabilities approaches in framing our analyses and explaining our results. We find that across firms and time, the merger events are positively and significantly associated with investments in fiber and digital assets. We stratify the data by size of firm to undertake detailed data analysis because of the presence of firm-specific heterogeneities and find that for the smaller merging firms there is a negative and significant association of mergers with investments in fiber and digital assets while for the larger merging firms this mergers and fiber and digital assets investments association is positive and significant. Our results support the predictions of the behavioral theories of the firm, and particularly the dynamic capabilities perspective. We draw implications for theory and competition policy of our results.

Do Incumbents’ Mergers Influence Entrepreneurial Entry? An Evaluation

This analysis has evaluated the impact of mergers on new entrepreneurial firm entry in the territories of firms making up the local exchange sector of the United States telecommunications industry. An analysis of first and second mergers undertaken by the local exchange companies has revealed that where mergers occurred there was significantly lower entrepreneurial entry. The results have implications for policy, since the approval of mergers has been shown to lead to lower entrepreneurial entry where mergers occur, and the approval of mergers may serve to impede entrepreneurship. Hence, greater thought should be given to merger approvals so that entrepreneurship and the process of economic growth are not compromised as a result.

On the determinants of non-market strategy: The separations mechanism and cost shifting in the telecommunications industry

This study examines the relationship between performance levels and the levels of cross-subsidy attained by local exchange carriers in the United States telecommunications industry. These cross-subsidies have been obtained by firms via their engagement in a separations mechanism, based on a cost allocation process, which telecommunications sector regulatory authorities use. Non-market strategies have assumed primacy in the activities of several sectors world-wide. Thus, understanding non-market strategic choices is important in the analysis of firms’ behavior and performance. Active engagement in the separations process is an important non-market strategy in the telecommunications industry, as a firm relatively successful in this activity can gain large cross-subsidies. The analysis establishes that less profitable firms obtain greater cross-subsidies. Once the profitability variable is decomposed into its two main components, which are productivity and price recovery, the impact of the profitability variable reduces. Firms which are relatively unproductive, as well as those unable to recover higher output prices, obtain relatively greater cross-subsidies. These results are inconsistent with the postulates of the strategic cost-allocation and behavior literatures but are consistent with x-inefficiency and rent-seeking perspectives of firms’ strategic actions.

Mergers, jobs, and wages in the United States telecommunications industry

This article evaluates the human capital consequences of several mergers of local exchange companies that took place between 1988 and 2001 in the telecommunications industry of the United States. Most firms in the sector underwent one merger event while other firms underwent two events. The levels of jobs and average wages in the firms are assessed after the merger events and analysis reveals that, while the first merger events experienced by firms led to growth in employment and compensation, second merger events, which included several mega-mergers of the late 1990s and early 2000s, have led to stagnation and decline in employment levels and to negative human capital outcomes with declines in wage levels.

Institutional changes, firm size and wages in the telecommunications sector

This article evaluates the impact of institutional changes and firm size on wage determination in the local exchange sector of the United States telecommunications industry. The firms examined are all the principal local exchange carriers in the United States telecommunications industry in a regulated segment where firms operate as local monopolies. Hence, these results are salient since the sector is ubiquitous in peoples’ lives and accounts for a large number of employees, though employment levels are declining. Wage determination is examined over a 14 year period, between 1988 and 2001, when several important institutional changes took place. The presence of rate of return regulation for prices, the impact of the Telecommunications Act 1996, the application of unbundled network elements-platform (UNE-P) and total element long-run incremental costs (TELRIC) rules and inter-modal competitive threats have pressurized wages downwards, while after mergers smaller firms experience higher wage levels. Absent institutional changes, the relationship between firm size and wages is negative and significant; however, the far-reaching institutional changes in the sector wash out the impact of size on wage levels.

Broadband adoption and firm productivity: evaluating the benefits of general purpose technology

We examine the relationship between the deployment of broadband, which we classify as a general purpose technology, and the productivity of the deploying firms using panel data that comprises information on all the major local exchange carriers in the United States telecommunications industry from 1995 to 2000. This relationship is an important indicator of the economic impact of new technology adoption. We provide a comprehensive analysis of the literature on general purpose technologies as well as on the economic consequences of information and communications technology diffusion and develop a framework to empirically assess the impact of broadband deployment on the productivity. Our results find a positive relationship between broadband deployment and the carriers' productivity and suggest that encouraging the deployment of broadband technologies, in addition to the benefits to consumers and firms at the receiving end of the new technology, create the potential for better technological efficiencies and increased productivity for the deploying firms. The benefits can be enhanced as the firms studied operate in two-sided markets where the network effects brought about by the multitude of interconnections can be substantial because of possible second-order spillovers of productivity. Copyright 2010 The Author 2009. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Wireless and wireline convergence

Recent changes in the United States telecommunications industry — both regulatory and market driven — provide an environment for integrating wireless and wireline services and the infrastructure used to provide them. Changes in the industry have created competition in local access, deregulation that allows bundling of services and one-stop shopping, and multiple personal communication services (PCS) licensees, each with the desire to differentiate its service offering with value-added capabilities. Integrating wireless and wireline services enables service providers to offer a seamless wireless/wireline service and help control infrastructure and ongoing administrative costs. This paper highlights some advantages for integrating these systems in the U.S. market today. We describe a vision of the long-term services architecture for a functional solution and several near-term product concepts designed to provide an integrated wireless/wireline service.

Economies of scope in the U.S. telecommunications industry

This study examines whether the existence of scope economies leads to reductions in unit costs for a sample of the key firms making up the local exchange sector of the United States telecommunications industry. Data for the years 1988 to 1992 are examined and the results establish that the generation of multiple outputs, using the resources infrastructure that the firms possess, does lead to reduction in average unit costs for the firms studied. The results thus shed light on a hitherto empirically ambiguous issue in telecommunications research, the relationship between diversity of operations and firm-level efficiency. Additionally, the deployment of digital technology has a positive and significant impact in reducing costs, across the multiple cost categories that are analyzed, providing support for the notion that technology diffusion is positively associated with superior firm performance.

Choosing Among Regulatory Options in the United States Telecommunications Industry

We examine the determinants of the choice between rate-of-return regulation and incentive regulation in the United States telecommunications industry. We find that a state is more likely to select incentive regulation in any year: (1) when it has employed incentive regulation in the past; (2) when the Republican party controls both the executive and the legislative branches of the state government, but the Democratic party has controlled these branches historically; and (3) as the firm‘s earnings under rate-of-return regulation increase toward the industry average. We also find that appointed regulators are more likely than their elected counterparts to revert to rate-of-return regulation.

Superior regulatory regimes in theory and practice

A substantial body of recent research finds thatprice-cap regulation is superior tocost-based regulation in that many of the distortions associated with the latter are reduced or eliminated entirely. We prove that the hybrid application ofcost-based and price-cap regulation that characterizes current regulatory practice in the United States telecommunications industry may generate qualitative distortions greater in magnitude than those realized undercost-based regulation. It follows thatprice-based regulation in practice may be welfare-inferior tocost-based regulation. The analysis further reveals that the firm subject to this modified form ofprice-based regulation may have incentives to engage in pure waste.