Impact of local competition and regulation on deployment of advanced telecommunications services for businesses

Abstract

After a decade of development, advanced telecommunications services (ATS) are widely available in many markets. This thesis is concerned with the impact of local competition and government regulation on the deployment of advanced telecommunications services for business in the United States. These services include packet switching, digital signal level (DS) technologies and synchronous optical network (SONET) – optical carrier (OC) transport. Increasingly, businesses are using these services for intra and extra network communications. Access to advanced telecommunication services is important for economic development. Government policy makers are interested in identifying what steps can be taken to accelerate the roll-out of services in their communities. Business and corporate users are often interested in services that are different from what the residential customers desire. This thesis focuses on a broader range of advanced services of interest to the business customers than most empirical research to date. It also provides a better and more insightful metric at a finer level of granularity to address these questions. The impacts of local business conditions, rivalry and regulations on the deployment of advanced telecommunication services are analyzed by means of econometric analysis. A rich data set has been constructed which identifies the competitive, regulatory and economic climates at each incumbent’s wire center in the United States. A qualitative response model is used to estimate how business characteristics of the communities and their regulatory environments affect the deployment of ATS. I conclude that local competition, federal subsidies, 271 approval, and high unbundled network element (UNE) price to book cost ratio have positive impacts on advanced telecommunication services deployment, while federal price cap regulation and location in a rural area have negative impacts. These findings have significant implications on government regulatory policies. The thesis recommends regulatory policies, which focus on services, such as rate-based rate-of-return regulation over price caps and encourages competitors’ entry, facilities-based competition and federal support to accelerate deployment of advanced telecommunications services. It concludes by encouraging governments and organizations to support more research, experimentation and better data collection to increase understanding of underlying socio-economic and regulatory factors affecting deployment of advanced telecommunications services.