Regional Bell Operating Company Entry into Long Distance and Non-Price Discrimination Against Rival Interexchange Carriers: Empirical Evidence from Panel Data

Abstract

This paper empirically investigates whether Section 271 decisions (i.e., approvals and denials), and the periods surrounding these decisions, affect the quality of interstate access services RBOCs provide to unaffiliated (i.e., rival) IXCs, and thus whether the practice of non-price discrimination by a vertically integrated RBOC is a valid policy concern. A panel of state-level data that contains information on various measures of the quality of interstate access services being provided by the RBOC to rival IXCs, and other measures expected to influence the quality of these services (e.g., state characteristics, degree of network modernization, etc.), is employed to empirically examine the non-price discrimination hypothesis in the context of FCC Section 271 decisions.

The empirical results suggest that the RBOCs may indeed degrade the quality of some forms of interstate access services to rival IXCs after obtaining approval to enter the long-distance market. Specifically, the results indicate that the RBOCs tend to increase the quality of their interstate access service offerings in the years prior to the approval of their Section 271 applications, but then begin to degrade the quality of these services almost immediately following their entry into the long-distance market. As such, the measures implemented by state and federal authorities to prevent Section 271-approved RBOCs from acting anti-competitively towards their local exchange competitors should also include more explicit provisions concerning the quality of the interstate access services provided to their unaffiliated long-distance competitors.

Note: This is a description of the article and not the actual abstract.

Keywords: access, non-price discrimination, sabotage, telecommunications, vertical integration

JEL Classification: L96, L43, K42, K23