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Has Deregulation Affected Investment in Special Access?

Scott Wallsten

Technology Policy Institute

July 31, 2007

Progress & Freedom Foundation Progress on Point Paper No. 14.16

Little empirical work carefully evaluates the special access market, and even less research has focused explicitly on the effects of deregulation (pricing flexibility). This paper attempts to address that gap in the literature by exploring empirically the relationship between the different types of special access deregulation and investment in special access facilities, specifically the number of special access lines provided by the Incumbent Local Exchange Carriers (ILECs).

Special access has long been regulated, but in 1999 the Federal Communications Commission (FCC) established a framework for lifting rate regulation in two phases as competition across a metropolitan statistical area reached specified trigger levels. Following the 1999 FCC order, rate regulation was slowly lifted, but some in Congress have called for re-regulating those rates and the FCC is investigating the issue.

Under empirical analysis, we find deregulation, in areas where the ILEC has thus been granted price flexibility, to be statistically and significantly associated with increases in the number of special access lines at the state level, even controlling for population, the size of the state's economy, per capita income, and state and year fixed effects. The general unavailability of data on actual prices from either the ILEC or competitors and the lack of any information on special access lines from competitors, however, make it impossible to reach definitive conclusions on the overall effects of special access deregulation.

Number of Pages in PDF File: 14

Keywords: deregulation, investment, special access, ILEC, incumbent local exchange, access lines, rate regulation, telecommunications, FCC, GAO, AT&T, Verizon, merger, SBC, MCI, MSA, MSAs, channel termination, access circuits, DS-1, DS-3, Wilkie, Spiwak, Rappoport, dedicated transport, high-speed

JEL Classification: L9, L96, L98, L5, L50, L51, L52, L43, L1, L11, L12

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Date posted: August 16, 2007  

Suggested Citation

Wallsten, Scott, Has Deregulation Affected Investment in Special Access? (July 31, 2007). Progress & Freedom Foundation Progress on Point Paper No. 14.16. Available at SSRN: https://ssrn.com/abstract=1007459 or http://dx.doi.org/10.2139/ssrn.1007459

Contact Information

Scott Wallsten (Contact Author)
Technology Policy Institute ( email )
1099 New York Ave., NW
Suite 520
Washington, DC 20001
United States
HOME PAGE: http://www.wallsten.net
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