Book contents
- Frontmatter
- Contents
- Preface
- About the Authors
- Deregulatory Takings and the Regulatory Contract
- 1 The Nature of the Controversy
- 2 Deregulation and Network Pricing
- 3 Quarantines and Quagmires
- 4 The Regulatory Contract
- 5 Remedies for Breach of the Regulatory Contract
- 6 Takings and the Property of the Regulated Utility
- 7 Just Compensation for Deregulatory Takings
- 8 The Efficient Component-Pricing Rule
- 9 The Market-Determined Efficient Component-Pricing Rule
- 10 Answering the Critics of Efficient Component Pricing
- 11 The Equivalence Principle
- 12 TSLRIC Pricing and the Fallacy of Forward-Looking Costs
- 13 Deregulatory Takings and Efficient Capital Markets
- 14 Limiting Principles for Stranded Cost Recovery
- 15 Deregulation and Managed Competition in Network Industries
- 16 The Tragedy of the Telecommons
- References
- Case Index
- Name Index
- Subject Index
9 - The Market-Determined Efficient Component-Pricing Rule
Published online by Cambridge University Press: 29 October 2009
- Frontmatter
- Contents
- Preface
- About the Authors
- Deregulatory Takings and the Regulatory Contract
- 1 The Nature of the Controversy
- 2 Deregulation and Network Pricing
- 3 Quarantines and Quagmires
- 4 The Regulatory Contract
- 5 Remedies for Breach of the Regulatory Contract
- 6 Takings and the Property of the Regulated Utility
- 7 Just Compensation for Deregulatory Takings
- 8 The Efficient Component-Pricing Rule
- 9 The Market-Determined Efficient Component-Pricing Rule
- 10 Answering the Critics of Efficient Component Pricing
- 11 The Equivalence Principle
- 12 TSLRIC Pricing and the Fallacy of Forward-Looking Costs
- 13 Deregulatory Takings and Efficient Capital Markets
- 14 Limiting Principles for Stranded Cost Recovery
- 15 Deregulation and Managed Competition in Network Industries
- 16 The Tragedy of the Telecommons
- References
- Case Index
- Name Index
- Subject Index
Summary
THE TELECOMMUNICATIONS ACT OF 1996 promised to replace nearly a century of monopoly regulation of the local telephone exchange with a regime that Congress said would “promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunication technologies.” Sections 251 and 252 of the act are the core provisions by which Congress sought to open local telephone markets to competition. Those two sections address the pricing of unbundled access to the network of the incumbent local exchange carrier (LEC). Roughly speaking, there are three ways for a firm to enter local telephony. First, it can build its own network and seek “interconnection” with the network of the incumbent LEC so that the entrant's customers can complete calls to the incumbent's customers. The relevant policy question is how much the incumbent LEC should charge to terminate a call originating on the entrant's network, and vice versa. The second method of entry is through “resale,” which means that the entrant buys from the incumbent LEC, at a wholesale price, the basic service provided to the customer. The entrant then retails that service under its own brand name and perhaps combines the service with other offerings. In the case of resale, the pertinent question is the size of the wholesale discount that the entrant should receive from the retail price for the basic service that the incumbent LEC sells to its customers. The third method of entry is through the leasing of unbundled network elements—the building blocks of the local network including loops and switches.
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- Chapter
- Information
- Deregulatory Takings and the Regulatory ContractThe Competitive Transformation of Network Industries in the United States, pp. 307 - 342Publisher: Cambridge University PressPrint publication year: 1997