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Re: Another Point Of View (Round 2)
At 09:23 AM 12/4/96 -0500, Bill Frezza wrote:
>At 8:01 PM -0500 12/3/96, James Love wrote:
>>Oh, one more thing. In game theoretic models, it is the expected
>>prices after entry when are important... not the prices before entry.
>Tell that to all the lunatics that bid $40 a pop for PCS licenses. There is
>no question that the consumer is going to be the big winner here as half a
>dozen network providers beat each other's brains out for business. Had we
>taken your approach, say using regulators to force the cellular duopolists
>to reduce their prices to some "fair" level, the results would have been
A straw horse being beaten, of course. We are *not* arguing for a regulated
duopoly to the exclusion of new entrants. We are saying that in the case of
the wireline industry, which in this sector is a pure monopoly, regulation
is necessary unless/until real competition shows up. The mobile phone
market is farther along towards a true competition model already, so the
same regulatory regime would not be appropriate.
In practice, though, the example tends to prove the counter-point. The
FCC's auction mentality led to a bidding up of the price of spectrum based
on the price charged for cellular telephony today. Given that lunatics did
pay $40 a pop, they're not about to set up low-cost high-bandwidth digital
fixed networks to compete with wireline. For one thing, spectrum cost is
*truly* usage-sensitive, as spectrum is consumed by *using* the radio, not
*owning* one. (Wireline phones, on the other hand, have the vast majority
of their costs in the non-traffic-sensitive arena.) For another, 20 cents a
minute sounds cheap compared to analog cellular, but outrageous compared
even to Bell Atlantic's wireline ISDN rates. What market would you compete
in if you paid that much for a sliver of spectrum?
Had the FCC wanted real wireless competition for wireline, they'd have
authorized larger chunks of spectrum and parceled them out differently.
But this is not the list to debate spectrum management.
Fred R. Goldstein email@example.com
BBN Corp. Cambridge MA USA +1 617 873 3850