roundtable: MFJ and long distance

roundtable: MFJ and long distance

MFJ and long distance

Timothy Stanley (tstanley@leland.stanford.edu)
Sat, 29 Apr 1995 15:19:36 -0700 

Message-Id: <v02110100abc85fa10a74@[36.173.0.68]>
Date: Sat, 29 Apr 1995 15:19:36 -0700
To: roundtable@cni.org
From: tstanley@leland.stanford.edu (Timothy Stanley)
Subject: MFJ and long distance


Note, I am sending this to both roundtable@cni.org and
telecomreg@relay.doit.wisc.edu. I apologize in advance if you 
receive this twice.


W. Curtiss Priest forwarded the following Interactive Week article (which I
have snipped down to the part I wish to address)
>
>White House Opposes Telecom Bill
>
>By Brock N. Meeks
>Inter@ctive Week, April 24, 1995, p. 5

***

>The fact that the bill guts the
>Justice Department's antitrust role in
>the telecommunications realm also
>tweaks the White House, according to
>the paper. The Administration suggests
>that the Justice role be beefed up, giv-
>ing it broad oversight powers vis-a-vis
>Bell company entry into long distance.
>
>The Justice Department also
>should make the determination of
>whether a local market is actually
>"competitive," the paper said, roles
>they don't have under the current bill.

***

I have a few questions/statements on Bell Operating company access into 
the long distance market.

I see the Bell Operating companies sometimes arguing that there is
competition in the local market. But when reading the fine print it 
says "there is as much local competition as is allowed by law." Which 
does not seem to be much (This seems analogous to Clinton's statement 
on smoking dope, "I broke no American laws").

My first question is this. Is there competition in the local market? 
Seems to me there is not. Maybe for some large business centers, but I 
have certainly never been offered a choice among local service 
providers. Even in the intra-area long distance market I have to dial 
5 extra digits to use AT&T or MCI.

Are there any profits from offering local service to me? What about
universal access, will competitors have to subsidize low income/rural
individuals too?

Onto the MFJ. The MFJ seems to state it is meant to protect competition 
in the long distance market (see language of the MFJ below). I do not 
believe that with all of the excess capacity for long distance calls 
that allowing the RBOCs to enter into long distance will adversely 
effect long distance competition. In fact I would expect that we would 
see one more long distance competitor in each of the 7 regions and more 
competition. If an RBOC ever got too much market power in the long 
distance market of its region then I am sure the Antitrust Division of 
the DOJ could step in again.

On the other hand it seems that the RBOCs might shift some of their long
distance costs onto their local customers. This certainly is bad, but I 
do not think that it would result in the RBOCs harming long distance 
competition. The RBOCs would be shifting costs to increase profits in 
the regulated market they already have a monopoly in, the local market, 
not to leverage their local market position to get a monopoly in the 
long distance market. It is really a separate issue, at least concerning 
the long distance restriction, that does not seem directly addressed by 
the MFJ.

So the question then is whether the MFJ is there to protect the local
customer or to promote long distance competition. I see it doing first 
but not the second. As the MFJ states that it is meant to do the second, 
should the MFJ be lifted?

My opinion is that it should not be lifted until there is at least 
some more local market competition (or at least some of the 
local/state regulations lifted). But this an economic opinion, not a 
legal opinion.  From the legal standpoint, for the promotion of 
competition in long distance, it seems the MFJ should be lifted.

Then again maybe Congress will pass a telecom bill making all of this 
go away. Then again, maybe not.



Peace,

Tim


--------------
A quick note on the MFJ language on the needed showing to allow a RBOC 
to enter the long distance market,

VIII.C.
The restrictions imposed upon the separated BOCs by virtue of II(D) 
shall be removed upon a showing by the petitioning BOC that there is no
substantial possibility that it could use its monopoly power to impede
competition in the market it seeks to enter.
---------------


---------------------   :  )   ----------------------------------
Timothy James Stanley
Engineering-Economic Systems, Stanford University
tstanley@leland.stanford.edu     tstanley@aol.com

WWW pages I like:

American Law and Economics Association:
http://www.epas.utoronto.ca:5680/alea/alea.html

Law and Economics WWW page:
http://www-leland.stanford.edu/~tstanley/lawecon.html

Statistics on Federal Court Cases (my favorite place to visit):
http://teddy.law.cornell.edu:8090/questata.htm

------------- :  ) Have a real good day! :  ) ---------------------

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