Deregulation, competition, and the network size in the market for telecommunication services

Benjamin Bental, Menahem Spiegel

Research output: Contribution to journalArticlepeer-review


This paper analyzes the networking aspect in telecommunication services and the recent divestiture and increased competitiveness of the industry. The product considered is the right to access the network. The utility of a consumer from having access to a network depends on the network's quality, defined by the number of other local and long-distance consumers which can be reached. Network services are provided in two layers; On the lower layer consumers within a local access and transport area (LATA) are connected to a central office which provides the basic switching facility for local telecommunication. On the upper layer, LATAs are connected together by an interLATA carrier, to enable long distance communication from different localities. It is shown that relative to the choices of an unconstrained monopolist, larger networks at both layers may be obtained by imposing quality controls, while price controls may have the opposite effect. A divestiture policy in which all local carriers are connected to a single long distance carrier is likely to reduce the quality of services at both layers. Introducing competition among long-distance carriers further reduces the quality of long distances services but may improve the local service.

Original languageEnglish
Pages (from-to)283-296
Number of pages14
JournalJournal of Regulatory Economics
Issue number3
StatePublished - Sep 1994
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics


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