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  archives: Vol. 1, Issue 1 - March 2002


Recent Empirical Evidence on Discrimination by Regulated Firms

The Review of Network Economics

Volume 1, Issue 1 - March 2002,  pp 39-53

  David Reiffen
U.S. Department of the Treasury
E-mail: [email protected]
  Michael R. Ward
University of Illinois

  Well-established economic principles show that regulated monopolies may have an incentive to act discriminatorily against rivals of their unregulated affiliates. This paper discusses some recent empirical evidence regarding discrimination in telecommunications. Specifically, it surveys anecdotal and systematic evidence that LECs discriminate against unaffiliated providers of mobile telephony. Evidence regarding discrimination by LECs against rival local phone companies is also discussed. At the same time, the evidence suggests that allowing LECs to enter cellular telephony may result in higher-quality or lower-cost cellular phone provision. These findings provide evidence that discrimination is a real phenomenon, and that there is a policy trade-off between preventing discrimination (by mandating separation) and realizing economies of scope.

Keywords: Non-price discrimination, cellular telephones, regulated industries, empirical evidence.

*The views expressed here reflect the views of the authors alone, and do not necessarily reflect the views of any organization. In particular, the views expressed here do not necessarily reflect those of the U.S. Treasury Department.

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