Anticompetitive use of excess capacity in international telecommunications

Leland L. Johnson

Telecommunications Policy, 1989, vol. 13, issue 3, 223-232

Abstract: Excess capacity in underseas cables and communications satellites may be used by their owners to deter entry by potential competitors. Because investment in capacity is an irreversible commitment, it enhances the credibility of the threat to cut prices to below cost as a 'predatory' tactic to render entry by others unprofitable. Although anticompetitive behaviour is hard to prove, issues of predatory use of excess capacity will persist into the 1990s. While excess capacity on transoceanic facilities imposes a cost on society, this cost may be less than the efficiency losses that result from monopoly. The cost of excess capacity, especially in the hands of new entrants, may be worth paying if it helps to break through monopoly bottlenecks held by many telecommunications carriers to their domestic markets.

Date: 1989
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