The level of competition among special access providers in metropolitan areas has been an issue for a number of years. While some believe that simply allowing these providers to operate in a truly open market the problems would be solved, many others feel that the Federal Communications Commission should increase regulation. A recent paper by the Phoenix Center, “Market Definition and the Economic Effects of Special Access Price Regulation,” supports the deregulatory position.
The authors note that, “In this paper, we show that under common characterizations of high capacity services, the core components of this decade-long debate are essentially irrelevant to the question as to whether price regulation would improve economic welfare. Indeed, if one assumes that high capacity services are provided by monopoly providers in highly granular, point-to-point markets, then price regulation reduces welfare and probably reduces investment in communications infrastructure.”
More simply put, the Phoenix Center argues, regulation does not decrease price, rather it simply limits the funds available for investment.
The full paper can be found at: http://www.phoenix-center.org/pcpp/PCPP37Final.pdf.
