2005
Publication:
John F. Kennedy School of Government, Harvard University

In the literature of antitrust, the monopoly bottleneck has an honored position that has recently enjoyed a revival of interest because of cases such as Verizon Communications Inc v Law Offices of Curtis V. Trinko, LLP. This essay shows how a regime of enforced network sharing or isolation of the bottleneck has worked or would work in one specific and important sector--the telecommunications sector. It concludes that neither policy is likely to be welfare enhancing in an environment of stagnant technology except as a means of providing opportunities for regulatory arbitrage and thereby sending important market signals to regulators. In the current environment of rapid technological change, however, concern over the telecommunications bottleneck is misplaced. The distribution plant of the local telephone company may have been a bottleneck of concern to antitrust authorities at one time, perhaps even as late as 1982 when the AT&T decree was entered. But this plant no longer contains a monopoly bottleneck because it is under severe pressure from new technologies and platforms. Allowing competitors to share this distribution plant or trying to separate it from other telecommunications operations is not only unnecessary today, but likely counterproductive. The telecommunications industry appears to be settling down into a competitive struggle between at least three vertically integrated platforms: the fixed-wire telephone companies, the cable television companies, and the wireless carriers. In addition, new fixed-wireless carriers (such as those using "WiFi") and satellite carriers may compete for large shares of communications service revenues. In this highly uncertain environment, any attempt to use antitrust or regulation to control the evolution of the communications market structure is perilous indeed.

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