Excessive(?) Entry of National Telecom Networks, 1990-2001

Abstract

We document entry and capacity expansion in US long-distance fiber-optic networks before and during the "telecom boom." We disentangle the many swaps and leases between networks in order to measure owned route miles versus route miles shared with other carriers. Entry appears much more moderate when these shared miles are not counted. Preemption strategies can lead to excessive entry, and we find evidence for preemptive behavior regarding total miles (including swaps and leases) but less for preemption regarding owned miles. We conclude that entry was excessive only with regard to swaps and leases, but not with regard to the physical building of the networks.

Keywords: telecommunications, investment, preemption

JEL Classification: L11, L13, L96