by Peter W. Huber, Michael K. Kellogg, and John Thorne
Wire and Radio . . . . . . . . . . . . . . . . . . . . . 1.3 Trading Places . . . . . . . . . . . . . . . . . . . . . 1.5 The Long Distance Monopoly . . . . . . . . . . . . . . . 1.13 The Geodesic Network . . . . . . . . . . . . . . . . . . 1.16 Regulation in Transition . . . . . . . . . . . . . . . . 1.25 Leveraging from the Top. . . . . . . . . . . . . . . . . 1.29 Reassembling the Pieces. . . . . . . . . . . . . . . . . 1.38 Toward 2002. . . . . . . . . . . . . . . . . . . . . . . 1.42
The Bottleneck Theory -- Then and Now. . . . . . . . . . 2.1 On Customers' Premises . . . . . . . . . . . . . . . . . 2.12 Radio in Last Mile . . . . . . . . . . . . . . . . . . . 2.15 Competitive Access Providers . . . . . . . . . . . . . . 2.24 Cable Television . . . . . . . . . . . . . . . . . . . . 2.53 Competitive Assessment . . . . . . . . . . . . . . . . . 2.68 Conclusion . . . . . . . . . . . . . . . . . . . . . . . 2.78
The Genesis of Unnatural Competition . . . . . . . . . . 3.2 Market Profile . . . . . . . . . . . . . . . . . . . . . 3.5 Regulation . . . . . . . . . . . . . . . . . . . . . . . 3.22 Structural Impediments to Competition. . . . . . . . . . 3.29 Prices and Output. . . . . . . . . . . . . . . . . . . . 3.35 The Candice-Coated Monopoly. . . . . . . . . . . . . . . 3.47 Conclusion . . . . . . . . . . . . . . . . . . . . . . . 3.52
A. THE REGULATORY CONTEXT. . . . . . . . . . . . . . . . 4.2 1. FCC Policies . . . . . . . . . . . . . . . . . . . 4.3 2. Divestiture Decree Restrictions. . . . . . . . . . 4.12 B. COMPETITIVE MARKETS . . . . . . . . . . . . . . . . . 4.14 1. Paging . . . . . . . . . . . . . . . . . . . . . . 4.15 2. Cellular Telephony . . . . . . . . . . . . . . . . 4.22 C. COMMUNITIES OF INTEREST. . . . . . . . . . . . . . . . 4.48 1. Regulatory Policies. . . . . . . . . . . . . . . . 4.48 2. Consumer Perspectives. . . . . . . . . . . . . . . 4.56 3. Producer Perspectives. . . . . . . . . . . . . . . 4.61 4. Communities of Interest and the RHCs . . . . . . . 4.82 5. Competitive Implications . . . . . . . . . . . . . 4.100 D. ANCILLARY SERVICES. . . . . . . . . . . . . . . . . . 4.103 E. OUTLOOK . . . . . . . . . . . . . . . . . . . . . . . 4.117 1. Communities of Interest. . . . . . . . . . . . . . 4.117 2. Ancillary Services . . . . . . . . . . . . . . . . 4.122 3. Competitive Radio Markets. . . . . . . . . . . . . 4.123 4. Competition in the Local Exchange. . . . . . . . . 4.133
A. CONVERGING MARKETS. . . . . . . . . . . . . . . . . . 5.5 B. MANY MEDIA. . . . . . . . . . . . . . . . . . . . . . 5.13 1. Customer Premises Equipment. . . . . . . . . . . . 5.13 2. Alternative Distribution Media . . . . . . . . . . 5.20 3. The Consumer's Perspective . . . . . . . . . . . . 5.28 4. The Producer's Perspective . . . . . . . . . . . . 5.46 5. Media Transparent Technologies . . . . . . . . . . 5.52 6. Summary. . . . . . . . . . . . . . . . . . . . . . 5.53 C. THE CONTENT BOTTLENECK. . . . . . . . . . . . . . . . 5.56 1. Niches Where Content is Critical. . . . . . . . . . 5.58 2. Niches Where Transmission Predominates. . . . . . . 5.72 D. SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . 5.81 E. EVOLVING REGULATION . . . . . . . . . . . . . . . . . 5.103
Central-Office Switches. . . . . . . . . . . . . . . . . 6.6 Transmission Equipment . . . . . . . . . . . . . . . . . 6.22 1. Suppliers. . . . . . . . . . . . . . . . . . . . . 6.31 2. Buyers . . . . . . . . . . . . . . . . . . . . . . 6.40 Customer-Premises Equipment. . . . . . . . . . . . . . . 6.44 1. Sellers and Providers. . . . . . . . . . . . . . . 6.52 2. Output and Prices. . . . . . . . . . . . . . . . . 6.60 Conclusion . . . . . . . . . . . . . . . . . . . . . . . 6.67
1.1 Effect of Access Charge Reductions on AT&T Rates. 1.15
1.2 On-line Service Centers . . . . . . . . . . . . . 1.34
1.3 Vertical Integration by Interexchange Carriers. . 1.36
2.1 LEC Access Lines and Telephone Revenues: 1992. . 2.2
2.2 LEC Switching . . . . . . . . . . . . . . . . . . 2.3
2.3 Competitive Access Providers -- Fiber Development 2.26
2.4 MFS Metropolitan Network. . . . . . . . . . . . . 2.27
2.5(a) Teleport Metropolitan Networks. . . . . . . . . . 2.36
2.5(b) Teleport New York Network . . . . . . . . . . . . 2.36
2.6 Competitive Access Providers -- Cities Served and
Investment. . . . . . . . . . . . . . . . . . . . 2.37
2.7 AT&T Access Charges as a Percentage of
Long-Distance Revenue . . . . . . . . . . . . . . 2.41
2.8 Interconnection Initiatives . . . . . . . . . . . 2.48
2.9 Incentive Regulation. . . . . . . . . . . . . . . 2.51
2.10 Cable TV Control of Competitive Access Providers. 2.60
2.11 Fiber Optics Penetration by the Top 10 Cable MSOs 2.61
2.12 PCN Licenses Granted to Cable Operators . . . . . 2.67
3.1 Interexchange Carriers Market Shares 1991 . . . . 3.9
3.2 Interexchange Carrier Operator Services Market. . 3.14
3.3 1990 IMTS Market Shares . . . . . . . . . . . . . 3.16
3.4 1990 Market Share (Revenue) in the 20 Largest
IMTS Geographic Markets . . . . . . . . . . . . . 3.18
3.5 Interstate Switched Access Minutes by Carrier . . 3.20
3.6 Changes in the Price of Directly Dialed
Long-Distance Calls . . . . . . . . . . . . . . . 3.20
3.7 AT&T Access Charges as a Percentage of
Long-Distance Revenue . . . . . . . . . . . . . . 3.23
3.8 Effect of Access Charge Reductions on AT&T Rates. 3.36
3.9 AT&T's Share of Interstate Minutes. . . . . . . . 3.45
3.10 AT&T's Total Toll Service Revenues. . . . . . . . 3.46
4.1 Radio Paging Channel Capacity . . . . . . . . . . 4.16
4.2 Wide-Area One-Way Paging Services Market:
Subscriber and Revenue Forecasts . . . . . . . . 4.19
4.3 Market Share of Paging Subscribers. . . . . . . . 4.21
4.4 Growth of the Cellular Industry . . . . . . . . . 4.23
4.5 1991 Cellular Market. . . . . . . . . . . . . . . 4.25
4.6 Growth of McCaw Cellular Communications, Inc. . . 4.28
4.7 Estimated Cellular Penetration Rates 1990 . . . . 4.44
4.8 Cellular Subscribers in Los Angeles . . . . . . . 4.45
4.9 Issuance of RSA Licenses and Construction Permits 4.54
4.10 Growth of Non-RHC Cellular Companies by CGSA
License. . . . . . . . .. . . . . . . . . . . . . 4.65
4.11 McCaw's Clusters (Number of MSAs and RSAs). . . . 4.68
4.12 Paging Services Waivers . . . . . . . . . . . . . 4.86
4.13 Paging Services Waiver Requests . . . . . . . . . 4.87
4.14 Cellular Waiver Requests. . . . . . . . . . . . . 4.96
4.15 District Court Decisions on Cellular Service
Waivers. . . . . . . . . . . . . . . .. . . . . . 4.97
4.16 Pending Waiver Requests . . . . . . . . . . . . . 4.98
4.17 Comparison of Retail and Bulk Wholesale
Interstate Interexchange Rates for Calls Placed
Between Major U.S. Cities . . . . . . . . . . . . 4.108
4.18 Phone Survey on Long Distance Service Provided
Facilities-Based Cellular Operators in MSAs
Without Equal Access Requirements . . . . . . . . 4.111
4.19 Savings Due to Bulk Long-distance Discounts for
Non-BOC Cellular Operators. . . . . . . . . . . . 4.116
4.20 Radio Paging Market, 1990 . . . . . . . . . . . . 4.125
4.21 Cellular Telephone Subscribers by Country, 1990 . 4.126
5.1 Revenues for Selected Segments of the
Information Services Industry . . . . . . . . . . 5.4
5.2 PC and Workstation Markets. . . . . . . . . . . . 5.15
5.3 Revenues for Data Processing Services, Software
and Equipment . . . . . . . . . . . . . . . . . . 5.16
5.4 Legal Research Libraries Currently Available on
CD-ROM. . . . . . . . . . . . . . . . . . . . . . 5.18
5.5 Ten Largest Cable MSOs. . . . . . . . . . . . . . 5.24
5.6 Selected Information Content Across Different
Media . . . . . . . . . . . . . . . . . . . . . . 5.31
5.7 Selected Consumers Across Different Media . . . . 5.34
5.8 Comparison of On-Line and Alternative Services:
Breakeven with On-Line Services in Minutes of
Usage Per Day . . . . . . . . . . . . . . . . . . 5.45
5.9 Selected Information Providers Across Different
Media . . . . . . . . . . . . . . . . . . . . . . 5.47
5.10(a) Data Transmission Media By Increasing Speed . . . 5.54
5.10(b) Data Transmission Media By Cost-Per-Bit . . . . . 5.55
5.11 Growth in Databases . . . . . . . . . . . . . . . 5.63
5.12 Major U.S. Videotex Services. . . . . . . . . . . 5.65
5.13 Public VAN Market Shares. . . . . . . . . . . . . 5.72
5.14 PAS Market Share of Major Gateways (Cell Volume). 5.78
5.15 INFONET Ownership . . . . . . . . . . . . . . . . 5.99
6.1 Countries on North American and International
Trunk Standards . . . . . . . . . . . . . . . . . 6.9
6.2 CO Switch Manufacturer U.S. Market Shares . . . . 6.12
6.3 Buyer Preferences Among Manufacturers . . . . . . 6.17
6.4 Transmission Equipment Industry . . . . . . . . . 6.25
6.5 Transmission Equipment Manufacturer U.S. Market
Shares. . . . . . . . . . . . . . . . . . . . . . 6.32
6.6 Microwave Manufacturer Market Shares. . . . . . . 6.35
6.7 Buyer Shares of Total Fiber Cable Purchases (1990) 6.42
6.8 VSAT Equipment Usage. . . . . . . . . . . . . . . 6.43
6.9 1991 PBX Manufacturer Market Shares by Lines
Shipped, by System Size. . . . . . . . . . . . . 6.53
6.10 PBX Shipments by Distribution Channel . . . . . . 6.54
6.11 Voice Messaging and Voice Response Manufacturer
Market Shares . . . . . . . . . . . . . . . . . . 6.56
6.12 Market Share for Cellular Network Equipment
Manufacturers, by Subscriber. . . . . . . . . . . 6.57
6.13 1991 Facsimile Terminal Manufacturer Market
Shares. . . . . . . . . . . . . . . . . . . . . . 6.59
6.14 VSAT Manufacturer Market Shares. . . . . . . . . . 6.60
6.15 Market Profile of CPE Revenues and Prices. . . . . 6.63
1.1 AT&T's Proposed PCS Architecture. . . . . . . . . 1.2
1.2 Transmission Plant Mileage. . . . . . . . . . . . 1.4
1.3(a) Pre-Cellular Architecture . . . . . . . . . . . . 1.6
1.3(b) Cellular Architecture . . . . . . . . . . . . . . 1.6
1.4(a) Frequency Reuse . . . . . . . . . . . . . . . . . 1.8
1.4(b) Cell-Splitting. . . . . . . . . . . . . . . . . . 1.8
1.5 Hand-Off. . . . . . . . . . . . . . . . . . . . . 1.9
1.6 Transmission Capacity . . . . . . . . . . . . . . 1.12
1.7 The Laminar Network . . . . . . . . . . . . . . . 1.20
1.8(a) The Radio Tail. . . . . . . . . . . . . . . . . . 1.24
1.8(b) Fiber/Radio Deployment. . . . . . . . . . . . . . 1.24
2.1 AT&T's Proposed PCS Architecture. . . . . . . . . 2.19
2.2 Fiber Optic Star Configuration. . . . . . . . . . 2.56
2.3 First Pacific Flyer . . . . . . . . . . . . . . . 2.64
2.4 LEC vs. Bypasser Economics. . . . . . . . . . . . 2.74
3.1 Indicators of AT&T Market Share . . . . . . . . . 3.11
3.2 Transmission Capacity . . . . . . . . . . . . . . 3.34
4.1 Growth of Paging Subscribers. . . . . . . . . . . 4.17
4.2 Growth of Paging Revenues . . . . . . . . . . . . 4.18
4.3 Growth of Cellular Subscribers. . . . . . . . . . 4.24
4.4 Prices of Mobile Cellular Telephones. . . . . . . 4.24
4.5 Number of Cities Services (1991). . . . . . . . . 4.27
4.6 Telco vs. Telco Competition . . . . . . . . . . . 4.47
4.7 FCC Licensing of MSAs . . . . . . . . . . . . . . 4.54
4.8 Cell-Splitting. . . . . . . . . . . . . . . . . . 4.127
5.1 Distribution of Information Services, On-Line
Communications Usage (LINK Resources) . . . . . . 5.50
5.2 Distribution of Information Services, On-Line
Communications Usage (MINITEL). . . . . . . . . . 5.51
6.1 Central Office Switching Consolidation in the
Digital Era . . . . . . . . . . . . . . . . . . . 6.14
2.1 New York-Lower Manhattan. . . . . . . . . . . . . 2.28
2.2 Chicago . . . . . . . . . . . . . . . . . . . . . 2.30
2.3 San Francisco . . . . . . . . . . . . . . . . . . 2.32
2.4 Washington, D.C. . . . . . . . . . . . . . . . . 2.34
4.1 Development of McCaw's Cellular Coverage. . . . . 4.29
4.2 Development of GTE's Cellular Coverage. . . . . . 4.34
4.3(a) Development of Ameritech's Cellular Coverage. . . 4.35
4.3(b) Development of Bell Atlantic's Cellular Coverage. 4.35
4.3(c) Development of BellSouth's Cellular Coverage. . . 4.36
4.3(d) Development of NYNEX's Cellular Coverage. . . . . 4.36
4.3(e) Development of Pacific Telesis's Cellular
Coverage. . . . . . . . . . . . . . . . . . . . . 4.37
4.3(f) Development of Southwestern Bell's Cellular
Coverage. . . . . . . . . . . . . . . . . . . . . 4.37
4.3(g) Development of US West's Cellular Coverage. . . . 4.38
4.4 Development of Centel's Cellular Coverage . . . . 4.41
4.5 Growth of Cellular Competition Between Telephone
Companies. . . . . . . . . . . . . . . . . . . . 4.46
4.6(a-c) MSAs and RSAs With at Least One License as of
(a) 1984; (b) 1987; (c) 1991 . . . . . . . . . . 4.55
4.7(a-b) Florida Cellular Coverage of (a) GTE;
(b) McCaw. . . . . . . . . . . . . . . . . . . . 4.72
4.8(a-b) California Cellular Coverage of (a) GTE;
(b) McCaw. . . . . . . . . . . . . . . . . . . . 4.74
4.9 GTE/Contel Cellular Coverage Along Selected
Southwest Highways . . . . . . . . . . . . . . . 4.77
4.10(a) Overlap Between MSA/RSA and LATA Boundaries in
the Ameritech Region. . . . . . . . . . . . . . 4.91
4.10(b) Overlap Between MSA/RSA and LATA Boundaries in
the Bell Atlantic Region . . . . . . . . . . . . 4.91
4.10(c) Overlap Between MSA/RSA and LATA Boundaries in
the BellSouth Region . . . . . . . . . . . . . . 4.92
4.10(d) Overlap Between MSA/RSA and LATA Boundaries in
the NYNEX Region . . . . . . . . . . . . . . . . 4.92
4.10(e) Overlap Between MSA/RSA and LATA Boundaries in
the Pacific Telesis Region . . . . . . . . . . . 4.93
4.10(f) Overlap Between MSA/RSA and LATA Boundaries in
the Southwestern Bell Region . . . . . . . . . . 4.93
4.10(g) Overlap Between MSA/RSA and LATA Boundaries in
the US West Region . . . . . . . . . . . . . . . 4.94
4.11 Growth of Cellular Competition Between RHCs. . . 4.121