Analysis Suggests Deregulation of Special Access Has Had Positive Effects on Investment
WASHINGTON D.C. - July 31, 2007 – Scott Wallsten, Senior Fellow and Director of Communications Policy Studies at The Progress & Freedom Foundation, today released the results of new research on the effects of special access deregulation in a paper titled, "Has Deregulation Affected Investment in Special Access?" Wallsten’s paper explores the relationship between deregulation ("pricing flexibility") and investment in special access.
Special access has long been regulated, but in 1999 the Federal Communications Commission (FCC) established a framework for lifting rate regulation in two phases as competition across a metropolitan statistical area reached specified "trigger" levels. Following the 1999 FCC order, rate regulation was slowly lifted, but some in Congress have called for re-regulating those rates and the FCC is investigating the issue.
"Little empirical work carefully evaluates the special access market, and even less research has focused explicitly on the effects of deregulation," said Wallsten. "This paper attempts to address that gap in the literature by exploring empirically the relationship between the different types of special access deregulation and the number of special access lines provided by the Incumbent Local Exchange Carriers (ILECs)."
In his paper, Wallsten finds deregulation to be statistically and significantly associated with increases in the number of special access lines at the state level, even controlling for population, the size of the state's economy, per capita income, and state and year fixed effects.
"I find generally that the number of special access lines increases in areas where the ILEC has been granted price flexibility," Wallsten said. "The general unavailability of data on actual prices from either the ILEC or competitors and the lack of any information on special access lines from competitors, however, make it impossible to reach definitive conclusions on the overall effects of special access deregulation."
The paper is available here.
The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.