Making the Connection: Exploring the Economics of Telecommunications

Aug 15, 2006Aug 17, 2006
B-339 Rayburn House Office Building


Session One: Tuesday, August 15th
Economic Lessons from the Video Franchising Debate
Dr. Jerry Ellig
Senior Research Fellow
Mercatus Center at George Mason University

Session Two: Wednesday, August 16th
Net Neutrality and the Economics of Telecom Networks
Greg Sidak, JD
Professor of Law
Georgetown University

Session Three: Thursday, August 17th
Telecom Mergers and Competition Policy
Dr. Robert Crandall
Senior Fellow
Brookings Institution

As Congress debates various ways to reform the 1996 Telecommunications Act, the telecommunications industry is changing in dramatic ways. The rise of new technologies, mergers and acquisitions, and threats by some service providers to charge Internet content providers have challenged the existing regulatory system.

The rise of new technologies has led to the prospect of companies providing cable television services through broadband lines and networks. Many local governments want to force these companies to negotiate local franchising agreements, similar to the agreements already in place with traditional cable providers. However, some policymakers want to create federal or state video franchises, which would eliminate the need for new competitors to get permission from numerous local governments before they can offer services.

Another contentious issue facing Congress is the current debate over "net neutrality." Proponents argue that net neutrality is necessary to protect the Internet from service providers who could act as "gatekeepers" by putting them in a position where they could favor some products and services over others, and extort payments from content providers for preferential treatment. Critics contend that net neutrality obligations would create disincentives for private investment in the broadband infrastructure that delivers content and applications to consumers.

Mergers and acquisitions have also caused some in Congress to call for reform. The recent acquisition of BellSouth by AT&T comes in the wake of other mergers in the telecommunications industry. Many wonder whether this consolidation stymies competition and may increase prices for consumers. However, many economists point to the irrelevance of antitrust enforcement in a rapidly changing competitive environment. Some argue that antitrust enforcement is generally ineffective and does nothing to benefit consumers.

In order to provide some economic insights into these difficult questions, the Mercatus Center will host a three day course for congressional staff. Participants will address such questions as:

  • What does economic research tell us about the effects of cable competition, franchise fees, and video regulatory mandates?
  • How can these same economic principles used to analyze the video debate also illuminate other aspects of communications policy?
  • What are arguments in favor of and opposed to "net neutrality"? What economic features of telecommunications networks are relevant to the net neutrality debate?
  • What is the primary goal of antitrust laws? What are previous examples of successes and failures of antitrust enforcement in the United States? What can we learn from these examples to apply to today's telecommunications industry?
  • What are the principal sources of monopoly and market power in the telecommunications industry and the overall economy?