Coase-Sandor Working Paper Series in Law and Economics

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Law & Economics Working Papers


We are at an unusual moment in telecommunications. We have two very live cases of entry: Internet protocol television (IPTV) and municipal wireless broadband. IPTV will create new competition with cable, satellite and over-the-air broadcast TV, promising lower prices and new services. Muni wireless makes it possible for local communities to add new broadband capabilities to compete with DSL and cable broadband. Unsurprisingly given the newness of the services, there is substantial uncertainty about whether and how these services should be regulated, and we have seen legislative action at municipal, state and federal levels. To assess that, I set forth a general framework for matching jurisdictions to tasks and consider coordination costs; information aggregation; speed; tailoring; and competence, capture and corruption. I also set forth a typology of legislative approaches: mandatory federal; default federal; uniformity by choice; experimental labs and competitive federalism; and mixed jurisdiction regulation. I also consider specific regulatory issues for telcom entry control, namely, the extent of the natural monopoly and the desired level of cross-subsidization. I consider four prior of telcom entry and regulation: cable TV franchising; control over pole attachments; the local entry preemption provisions of the 1996 Telecommunications Act; and entry into satellite broadcasting. With that framework, I turn to muni wireless and IPTV. Muni wireless turns on decisions about quintessentially local assets, such as municipal light poles, and provision of the service involves few across-jurisdiction externalities. Plus there are a number of decisions regarding the service—tradeoffs between advertising and price and disagreements over the extent of the digital divide—that suggest we should see natural variation in the services. That makes local control appropriate and we should be critical of contrary state and federal efforts. For IPTV, a critical question is the required scope of entry: to what extent will an entrant be required to build-out services to serve an entire local area? Again that turns on contested conceptions about universal service obligations and would be best addressed locally.



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