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will competitors be allowed to compete? the regulation of long-term contracts in the telecommunications industry

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The US telecommunications industry is on the brink of profound change. Firms and regulators are now fighting over how that change will take place. All of these battles will touch upon a crucial question: how will competitors, especially incumbent providers, be allowed to compete? In particular, a battle is brewing over whether incumbent providers can offer customers long-term contracts. Conceivably, such contracts may have anti-competitive consequences. However, the theory of contracts as anti-competitive instruments has several necessary conditions. A review of those conditions, and application of them to the telephone industry, indicates that such contracts do not meet these conditions. In addition, long-term contracts have the potential to aid consumers in numerous ways. Given this, calls to regulate such contracts can be seen as anti-, rather than pro-, consumer. We therefore urge regulators to focus on protecting competition, rather than competitors.
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Document Type: Research Article

Publication date: 01 October 1999

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