Natural monopoly and the deregulation of local telephone service

John T. Wenders

Telecommunications Policy, 1990, vol. 14, issue 2, 125-138

Abstract: Natural monopoly theory fails to provide a credible reason for regulation. Before regulation, competition in the US telephone industry performed its classic function of providing discipline on prices, profits and costs. Loop-conserving technological developments have now reduced the minimum efficient size of entry and made local competition a feasible substitute for regulation. A policy of open entry, mandatory non-discriminatory interconnection, and allowing resale would bring this about. Politically, such an outcome is most likely when the local carriers' capital-recovery problems have been resolved, the toll-to-local subsidy has dissappeared, and parity is brought about between residence prices and costs.

Date: 1990
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