A Dynamic Model of Incumbent LEC Response to Entry under the Terms of the Telecommunications Act of 1996

Trevor R Roycroft

Journal of Regulatory Economics, 1998, vol. 14, issue 3, 27 pages

Abstract: This paper dynamically models an incumbent Local Exchange Carrier's (LECs) ability to control market entry with a profit squeeze. The model is consistent with the post-Telecommunications Act of 1996 local exchange market. The model shows that an unconstrained incumbent could choose output prices and input costs to discourage an entrant's output-market production. The impact of a regulatory constraint on incumbent behavior is examined. It is concluded that cost-based input prices may lead to little growth in the entrant's self-provision of inputs and that continuing oversight of output and input prices may be necessary. Copyright 1998 by Kluwer Academic Publishers

Date: 1998
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