Toward a Unified Theory of Access to Local Telephone Networks, Federal Communications Law Journal
Over the past several decades, regulatory authorities have imposed an increasingly broad array of access requirements on local telephone providers. In so doing, policymakers typically applied previous approaches to access regulation without fully considering whether the regulatory justifications used in favor of those previous access requirements remained valid. They also allowed each access regime to be governed by a different pricing methodology and set access prices in a way that treated each network component as if it existed in isolation. The result was a regulatory regime that was internally inconsistent and vulnerable to regulatory arbitrage. In this Article, Professors Daniel Spulber and Christopher Yoo trace the development of these access regimes and evaluate the continuing validity of the rationales traditionally invoked to justify mandating access to local telephone networks (e.g., natural monopoly, network economic effects, vertical exclusion, and ruinous competition) in a world in which competition among local telephone providers is a real possibility. They then apply a five-part framework for classifying different types of access based on the branch of mathematics known as graph theory that models the interactions among different components. This framework shows how different types of access can have a differential impact on network configuration, capacity, reliability, and cost. It also captures the extent to which networks constitute complex systems in which network components interact with one another in ways that can make network behavior quite unpredictable. In addition, the framework demonstrates how mandated access can increase transaction costs by forcing local telephone providers to externalize functions that would be more efficiently provided within the boundaries of the firm.
Daniel Spulber, Christopher S. Yoo
Spulber, Daniel, and Christopher S. Yoo. 2008. Toward a Unified Theory of Access to Local Telephone Networks. Federal Communications Law Journal. 61(1): 1-79.