by Peter W. Huber
GENESIS
1. THE GEODESIC NETWORK
DISMANTLING THE PYRAMID . . . . . . . . . . . . . . . . . 1.2
REASSEMBLING THE CORPORATE PIECES . . . . . . . . . . . . 1.6
The Usual Suspects . . . . . . . . . . . . . . . . . 1.7
Competition and Conglomerates. . . . . . . . . . . . 1.9
EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . 1.10
Regulation . . . . . . . . . . . . . . . . . . . . . 1.13
EXCHANGE AND INTEREXCHANGE SERVICES . . . . . . . . . . . 1.17
Regulation . . . . . . . . . . . . . . . . . . . . . 1.21
INFORMATION SERVICES. . . . . . . . . . . . . . . . . . . 1.23
Regulation . . . . . . . . . . . . . . . . . . . . . 1.26
NEW RULES . . . . . . . . . . . . . . . . . . . . . . . . 1.30
TOWARD 2014 . . . . . . . . . . . . . . . . . . . . . . . 1.34
2. THE LOCAL EXCHANGE
SWITCHING . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Network Entry Nodes. . . . . . . . . . . . . . . . . 2.4
Switching Alternatives . . . . . . . . . . . . . . . 2.4
Economic and Regulatory Indicators . . . . . . . . . 2.9
Competitive Assessment . . . . . . . . . . . . . . . 2.12
SHORT-HAUL TRANSMISSION . . . . . . . . . . . . . . . . . 2.13
Short-Haul Transmission Alternatives . . . . . . . . 2.13
Economic and Regulatory Indicators . . . . . . . . . 2.18
Competitive Assessment . . . . . . . . . . . . . . . 2.23
DETARIFFING . . . . . . . . . . . . . . . . . . . . . . . 2.24
CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . 2.25
3. INTEREXCHANGE COMMUNICATIONS
SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . 3.1
ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
SWITCHED ACCESS . . . . . . . . . . . . . . . . . . . . . 3.10
Interconnection. . . . . . . . . . . . . . . . . . . 3.10
Pricing. . . . . . . . . . . . . . . . . . . . . . . 3.19
Network Performance and Control. . . . . . . . . . . 3.21
Customer Information and Control . . . . . . . . . . 3.24
UNSWITCHED ACCESS . . . . . . . . . . . . . . . . . . . . 3.25
LEC and non-LEC Interconnection Alternatives . . . . 3.25
Pricing. . . . . . . . . . . . . . . . . . . . . . . 3.31
Network Control. . . . . . . . . . . . . . . . . . . 3.35
Customer Information and Control . . . . . . . . . . 3.37
MARKET SEGMENTATION . . . . . . . . . . . . . . . . . . . 3.38
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 3.48
Principal Common Costs and Tariffs . . . . . . . . . 3.49
Market Factors . . . . . . . . . . . . . . . . . . . 3.50
Regulation . . . . . . . . . . . . . . . . . . . . . 3.53
The Bottom Line. . . . . . . . . . . . . . . . . . . 3.55
CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . 3.56
4. MOBILE RADIO SERVICES
SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . 4.5
ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . 4.9
Interconnection. . . . . . . . . . . . . . . . . . . 4.10
Prices . . . . . . . . . . . . . . . . . . . . . . . 4.15
Access to Network and Customer Information . . . . . 4.18
Competitive Assessment . . . . . . . . . . . . . . . 4.18
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 4.19
Market Factors . . . . . . . . . . . . . . . . . . . 4.21
Regulation . . . . . . . . . . . . . . . . . . . . . 4.21
Competitive Assessment . . . . . . . . . . . . . . . 4.22
5. DATA TRANSMISSION AND PACKET SWITCHING
SWITCHING . . . . . . . . . . . . . . . . . . . . . . . . 5.4
HAULING . . . . . . . . . . . . . . . . . . . . . . . . . 5.9
Private Transmission . . . . . . . . . . . . . . . . 5.10
Public Transmission . . . . . . . . . . . . . . . . 5.10
ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . 5.13
Interconnection. . . . . . . . . . . . . . . . . . . 5.14
Access Prices. . . . . . . . . . . . . . . . . . . . 5.17
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 5.18
Local Public Exchanges . . . . . . . . . . . . . . . 5.19
National Public Networks . . . . . . . . . . . . . . 5.21
NETWORK INTEGRATION . . . . . . . . . . . . . . . . . . . 5.25
Private Exchanges. . . . . . . . . . . . . . . . . . 5.26
Non-Bell Carriers. . . . . . . . . . . . . . . . . . 5.27
Foreign Telephone Companies. . . . . . . . . . . . . 5.27
CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . 5.28
6. INFORMATION SERVICES
Regulatory Lines . . . . . . . . . . . . . . . . . . 6.2
SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . 6.5
Services Offered through non-LEC Network Gateways. . 6.6
Information Services Offered through LEC Gateways. . 6.14
ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . 6.17
Non-LEC Access Alternatives (Bypass) . . . . . . . . 6.17
Interconnection to LEC Switches (Equal Access) . . . 6.23
Prices . . . . . . . . . . . . . . . . . . . . . . . 6.28
Timing, Quality, Testing, and Maintenance of Services 6.30
Network Design and Operation . . . . . . . . . . . . 6.30
Customer and Competitor Information. . . . . . . . . 6.32
Benchmark Regulation and the GTE Experience. . . . . 6.32
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 6.33
ISP Use of LEC Telecommunications Services . . . . . 6.34
Shared Costs . . . . . . . . . . . . . . . . . . . . 6.35
NETWORK INTEGRATION . . . . . . . . . . . . . . . . . . . 6.40
Summary. . . . . . . . . . . . . . . . . . . . . . . 6.46
CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . 6.48
The Second Generation. . . . . . . . . . . . . . . . 6.50
7. COMPUTERIZED DATABASES AND ELECTRONIC PUBLISHING
SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . 7.3
ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . 7.7
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 7.13
Market Factors . . . . . . . . . . . . . . . . . . . 7.14
Regulation . . . . . . . . . . . . . . . . . . . . . 7.15
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . 7.15
8. PUBLIC ANNOUNCEMENT SERVICES
SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . 8.2
ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . 8.6
Access Prices. . . . . . . . . . . . . . . . . . . . 8.7
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 8.10
CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . 8.12
9. ELECTRONIC YELLOW PAGES
SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . 9.2 ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . 9.4 JOINT COSTS . . . . . . . . . . . . . . . . . . . . . . . 9.7 CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . 9.9
10. VOICE STORAGE AND RETRIEVAL
SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . 10.2
The Equipment Market . . . . . . . . . . . . . . . . 10.3
The Service Market . . . . . . . . . . . . . . . . . 10.6
Costs of Service from Alternative Sources. . . . . . 10.9
Alternatives to VSR Service. . . . . . . . . . . . . 10.16
Summary. . . . . . . . . . . . . . . . . . . . . . . 10.17
ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . 10.18
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 10.21
CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . 10.23
11. ELECTRONIC MAIL
THE MARKET FOR ELECTRONIC MAIL. . . . . . . . . . . . . . 11.1
STATE OF THE MARKET . . . . . . . . . . . . . . . . . . . 11.3
Alternatives to Electronic Mail. . . . . . . . . . . 11.10
COMPETITIVE IMPLICATIONS OF BOC ENTRY . . . . . . . . . . 11.14
CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . 11.17
12. TRANSACTIONAL SERVICES
CREDIT CARD TRANSACTION SERVICES. . . . . . . . . . . . . 12.1
MARKET DEFINITION . . . . . . . . . . . . . . . . . . . . 12.2
STATE OF THE MARKET . . . . . . . . . . . . . . . . . . . 12.4
Present Producers. . . . . . . . . . . . . . . . . . 12.4
Scale and Scope of Economies . . . . . . . . . . . . 12.6
COMPETITIVE IMPLICATIONS OF INDUSTRY STRUCTURE. . . . . . 12.7
Suppliers. . . . . . . . . . . . . . . . . . . . . . 12.7
New Entrants . . . . . . . . . . . . . . . . . . . . 12.14
CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . 12.15
13. ALARM MONITORING
SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . 13.3
ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . 13.4
Access . . . . . . . . . . . . . . . . . . . . . . . 13.6
Prices . . . . . . . . . . . . . . . . . . . . . . . 13.8
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 13.9
Market and Regulatory Factors. . . . . . . . . . . . 13.10
CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . 13.11
14. CENTRAL-OFFICE SWITCHES
SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . 14.4
MANUFACTURER-BUYER RELATIONS. . . . . . . . . . . . . . . 14.8
MARKET FORECLOSURE. . . . . . . . . . . . . . . . . . . . 14.12
Market Factors . . . . . . . . . . . . . . . . . . . 14.13
Regulation . . . . . . . . . . . . . . . . . . . . . 14.17
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 14.19
Common Costs . . . . . . . . . . . . . . . . . . . . 14.20
Market Factors . . . . . . . . . . . . . . . . . . . 14.21
Regulation . . . . . . . . . . . . . . . . . . . . . 14.24
ANYBODY BUT AT&T? . . . . . . . . . . . . . . . . . . . . 14.25
15. TRANSMISSION EQUIPMENT
SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . 15.3
MARKET FORECLOSURE. . . . . . . . . . . . . . . . . . . . 15.7
Market Factors . . . . . . . . . . . . . . . . . . . 15.7
Standards. . . . . . . . . . . . . . . . . . . . . . 15.9
Regulation . . . . . . . . . . . . . . . . . . . . . 15.10
INTERCONNECTION . . . . . . . . . . . . . . . . . . . . . 15.11
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 15.11
Common Costs . . . . . . . . . . . . . . . . . . . . 15.11
Market Factors . . . . . . . . . . . . . . . . . . . 15.12
16. PRIVATE BRANCH EXCHANGES
SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . 16.4
ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . 16.8
Interconnection. . . . . . . . . . . . . . . . . . . 16.8
Prices . . . . . . . . . . . . . . . . . . . . . . . 16.10
Timing, Quality, Testing, and Maintenance of
Services . . . . . . . . . . . . . . . . . . . . . . 16.12
Network Design and Operation . . . . . . . . . . . . 16.15
Customer and Competitor Information. . . . . . . . . 16.21
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 16.22
Common Costs . . . . . . . . . . . . . . . . . . . . 16.22
Market Factors . . . . . . . . . . . . . . . . . . . 16.23
Regulation . . . . . . . . . . . . . . . . . . . . . 16.25
The Bottom Line. . . . . . . . . . . . . . . . . . . 16.27
17. TERMINAL EQUIPMENT
SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . 17.3
NETWORK ACCESS. . . . . . . . . . . . . . . . . . . . . . 17.7
Interconnect Supply. . . . . . . . . . . . . . . . . 17.7
Interconnection Standards and Network Performance. . 17.10
Access Regulation. . . . . . . . . . . . . . . . . . 17.13
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . 17.13
Common Costs . . . . . . . . . . . . . . . . . . . . 17.14
Market Factors . . . . . . . . . . . . . . . . . . . 17.14
Regulation . . . . . . . . . . . . . . . . . . . . . 17.15
APPENDICES
A. NON-LEC MICROWAVE, SHARED FIBER-OPTIC, AND SATELLITE TRANSMISSION SYSTEMS IN SELECTED LATAs B. STATE REGULATION OF FACILITIES-BASED CARRIER COMPETITION C. SUMMARY OF RESTRICTIONS ON SHARED-TENANT SERVICES D. DETARIFFING AND SOCIAL-CONTRACT PRICING INITIATIVES IN US WEST REGION E. A SURVEY OF BYPASS SURVEYS F. STATE RESTRICTIONS ON INTRALATA TOLL COMPETITION