Abstract - The Information Society 2 (3)

The Regulation of Telecommunications Networks

Stanley M Besen

Recent regulatory changes affecting the provision of telecommunication network services are reviewed. These changes have led to substantially increased competition in the telecommunications industry, especially in the provision of long-distance telephone services. A variety of explanations accounting for the dramatic increase in network services are examined, along with the pricing principles that have been used by the telecommunications industry. A fundamental pricing principle has been the subsidization of local residential services by long-distance services and local network services to business customers. Residential service subsidies have been eroded by competition in long-distance markets and may be further jeopardized as local networks face increased competition from new entrants. In this new competitive environment, policymakers must: 1. assess the need for continuing regulation of telecommunications services, 2. determine permissible pricing policies, and 3. seek the preservation of residential service subsidies.

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