Actual and potential competition in international telecommunications

Jason Pearcy, Scott J. Savage
2015 International Journal of Industrial Organization  
By allowing carriers to provide international telephone calls over low-cost private lines, international simple resale (ISR) reduces entry barriers and can increase competition. Using data from US markets from 1995 to 2004, we estimate the effects of ISR on entry and retail prices. Results show that ISR has no effect on entry and actual competition. However, controlling for actual competition, ISR authorization causes a reduction in prices of 33.4 percent on average. Markets with relatively
more » ... carrier surplus experience an additional reduction in the price by 0.5 percent, and an additional reduction of 3.1 percent in markets with relatively high private line capacity. Our findings suggest that ISR promotes potential competition and lower prices in markets where the threat of hit-and-run entry is more creditable. JEL Classification: C21, D04, L1, L13, L96.
doi:10.1016/j.ijindorg.2015.07.006 fatcat:eskkjialonfmnb2dsmfrzjgwpe