Competition and Rboc Revenues and Infrastructure Investment: the Case Of

This paper quantifies how differences in regulatory rules toward competition across the states of Arkansas (AR), California (CA), Illinois (IL), New York (NY) and Texas, (TX) impact the level and rate-of-change of infrastructure modernization investment and the level and rate-of-change of various measures of average revenue for the Regional Bell Operating Company (RBOC) serving each state. AR and TX are the late adopters of pro-competition policies and CA, IL and NY are traditionally pro-competition states, with IL and NY early adopters of pro-local competition policies, and CA slightly later in its adoption of pro-local competition policies. The results of infrastructure modernization comparisons and revenue comparisons are consistent with the view that the historically pro-competition states delivered benefits to their consumers in the form of greater accessibility to advanced telecommunications services earlier, lower average prices for the three classes of RBOC services, and lower rates of growth in these average prices. • This study uses data on infrastructure investment and net revenues collected from annual reports by the RBOCs made to the Federal Communications Commission. • Four classes of infrastructure modernization investment associated with the provision of advanced telecommunications services are compared: kilometers of fiber optic cable installed, Digital Stored Program Controlled (DSPC) switches, access lines and switches equipped to provide Integrated Services Digital Network (ISDN) services, and switches and access lines equipped with Signaling System 7 (SS7) capabilities. • With a few exceptions, for all years in the sample running from 1992 to 1994, the fraction of the RBOC's network in each state containing this modern telecommunications infrastructure was significantly higher in IL, NY and CA (the states adopting competition policies early) than in AR and TX (the slower adopting states). • By 1995, for some measures of infrastructure modernization, TX and AR caught or surpassed CA, IL or NY. In these cases, the end of 1995 penetration of the specific technology was very high in all of the RBOCs' networks. • In the important area of digital switching, TX remained significantly behind CA, IL and NY for each of the years 1992 through 1995. • AR and TX experienced more rapid growth over the sample period in basic local service revenues per residential access line, than CA, IL and NY. For 1995, NY and IL experienced significant drops in average revenues per residential access line relative to 1994. • For all years, AR and TX had higher values for …