David Gast <gast@cs.ucla.edu> (05/07/91)
Over the past several months there have been repeated posts to the effect that decreasing regulation will result in lower communication costs. I don't believe it and past evidence does not support it. First off, in CA the PUC granted GTE and PacTel deregulation to a large extent. Prices have not fallen. The quid pro quos from the deregulation deal have not happened. In fact, I believe that GTE is in the process of proposing that the monthly charge go from about $10.00 to $25.00. An increase of only 250%. :-( (This change also seems to go against the spirit of the deregulation deal if I understand that deal correctly). Second, AT&T was granted some deregulation. Another one of these "if we have deregulation we will have incentive to work more efficiently." Instead of lowering its prices as much as it would have before deregulation, however, AT&T has decided to just keep the extra profits. Daniel R. Guilderson wrote: > Let's deregulate the telecommunications industry... We'll throw the > phone companies, the cable companies, the LAN/WAN companies and anyone > else who wants a peice of the action into a battle royal. The > competition will be so vicious that prices will have to fall. Eventually > there would be a shakeout and we would be left with a few very lean and > mean competitive communications companies. Any new technologies would > then be offered quickly as a competitive advantage. It sounds good on paper, but I don't believe that the real world works like this. What happens is that the big boys push the upstarts out of business and formally or informally start a cartel. Consider Airlines. We deregulated and many new airlines formed. Now most of them are out of business. The remaining airlines are hardly lean (the upstarts that are now out of business were lean) and they don't have to be because in most major markets one or two airlines control almost all the landing slots. In St. Louis, for example, TWA has something like 83%. They got this penetration by merging with the number two carrier in St. Louis. Long lines has been much the same. Most of the smaller carriers have been forced out of business and now we have the situation where there is at least an implicit understanding in the market place that it makes no sense to lower prices because AT&T will lower its prices as well and the result will not be an increase in market share, but lower profits. Additionally, I do not believe that having just a few competitors ever leads to technological advance as quickly as when there are many competitors. Consider cars when there were for all practical purposes only the big three. Consider cars now when there are many more competitors in the U.S. market. Consider main frame computers dominated by one company with several smaller ones. Now consider microcomputers and workstations with many, many competitors. You can do things on a microcomputer today that you still cannot do on main frames. After the shake out, "any new technologies would" *not* "be offered quickly as a competitive advantage." I think that John Levine is right on target: > A plausible outcome of this scenario is that everyone except the deepest > pockets would end up bankrupt, and we'd be left with AT&T and the RBOCs > more monopolistic than now. Or maybe General Motors or IBM. David Gast
"Daniel R. Guilderson" <ryan@cs.umb.edu> (05/11/91)
gast@cs.ucla.edu (David Gast) writes: > It sounds good on paper, but I don't believe that the real world works > like this. What happens is that the big boys push the upstarts out of > business and formally or informally start a cartel. Consider Airlines. The bottom line for me is that I have a choice of who I want to fly with in the air. On the phone I either fly with NET or I don't fly at all. At least with the LDs I have a choice. If I'm unhappy with NET I can't take my business elsewhere. I have to suffer and the government doesn't give a rats ass unless they can use it for political advantage. I don't like this situation, not one bit. If there was even one other choice it would make me feel a little better. If there is some other way besides deregulation to get many competitors into the arena then let me know about it otherwise I'm a 100% supporter of heavy duty deregulation. (Sometimes things have to get worse before they get better.) Daniel Guilderson ryan@cs.umb.edu UMass Boston, Harbor Campus, Dorchester, MA USA