During the 90s a new wave of communication services was supposed to emerge. A generation of new technology would give users a choice in a very limited market. An innovative wave of competitive prices and new services was predicted to knockout the market. This section examines the effectiveness of the 1996 Telecommunications Act in terms of increasing competition in the local and long distance telephone markets. Unpredictably competitive markets have emerged in areas where it was not expected.
One of the major goals of the 1996 Telecommunications Act was to encourage competition in the local exchange and long distance wireline markets. “In section 271 Congress developed an incentive structure where the Bell Operating Companies (BOCs) are rewarded with entry into the long distance markets in their territory if they can demonstrate to the Federal Communications Commission (FCC) that they have opened their local wireline markets to ...view middle of the document...
Compliance with section 251 was a logical method of protecting the long distance market against BOC discriminating against long distance competitors once it has gained entry. Based on the statistical evidence of five years on the market after the enactment of the Act, section 271 has so far been effective in ensuring compliance.
Chapter eight is a competitive analysis of international long distance by Sean Ennis. In this section, the relationship between changes in telecommunications provider concentration on international long distance routes and changes in prices on those routes are examined. “The reason that price reductions could be so dramatic and yet not indicate active competition is that costs themselves have fallen substantially,” (p. 217). The relationship between concentration and price is dependent on the type of long distance plan. The cost of international long distance plans has also dropped. “In the face of dramatic cost reduction, prices would likely decline even in the absence of competition… Thus the fact that prices have fallen may simply reflect lower costs rather than increased competition,” (p. 218). Dissimilarly, increased competition is associated with higher prices. A range of prices should technically increase as competition increases.
The final part of this section discusses ownership concentration and product variety in daily newspaper markets by Lisa George. The effect of ownership concentration on product position, product variety and readership in markets for daily newspapers is examined. Its believed “that a larger number of owners and products in a market leads to better outcomes,” (p. 235) and less stations lead to less variety. Analyzing data on reporter assignments from 1993-1999, George tests how Newspaper variety varies with city newspaper concentration. The results “reveal that a decrease in the number of owners in a market leads to an increase in the number of topical reporting beats covered per market,” (p. 237) and furthermore increasing readership. Concentration in newspapers does not hurt the market, but helps to provide more content consequently adding more interesting topics and increasing the amount of readers.