The Effect of Section 271 on Competitive Entry into Local Telecommunications Markets: An Initial Evaluation

Abstract

In 1996 Congress passed the landmark Telecommunications Act (hereafter "the Act"). The Act, under Section 271, allowed the Regional Bell Operating Companies to offer long distance service to their local customers in exchange for opening their own local networks to local competitors in that state. Using a state-level panel data set we evaluate the effect of FCC Section 271 decisions on entry into the local telephone exchange market. OLS and Poisson estimates suggest that Section 271 approvals increase the number of local competitive entrants before and during the year the approval is granted. We obtain no statistically significant and robust results for the effects of Section 271 approval on entry during the following year. In addition, the estimates suggest that Section 271 denials have no statistically significant effect on the entry of local competitors.

Keywords: Section 271, long-distance, telecommunications, deregulation, entry

JEL Classification: L96, L43, K23