Public Policies to Encourage Cable and ISDN Residential Internet Access

This paper analyzes inter-firm alliances for providing the home computer user with an innovative new telecommunications service: a high-speed connection to the Internet. After providing an overview of the Internet access provider industry, it discusses the split of competencies needed to deliver this new service, between monopolistic infrastructure (cable and local telephone) companies and entrepreneurial Internet service providers. It finds that the asymmetry in market power between the two partners holds up the diffusion of this innovation, and can best be remedied by more open access to both the subscriber and provider sides of the cable network, along with increased competition in all forms of local communications infrastructure.