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Pick a Card: Cost Allocations and the Impact on Service Competition

 

October 1997

 

Subject:

 

Competition, Costs, Industry Convergence, Investment, Markets (Rural, Suburban, Urban), Services, Technology

 

Full Paper          Executive Summary

 

Overview:

 

Part of a series on advanced technology deployment, Pick a Card, shows the impact of arbitrary regulatory treatment of new services before they've been deployed.  A simple model compares three different "cost allocation" scenarios on competition and investment.  It compares two networks types (telephone and cable TV) which use the same facilities to carry voice and video services to customers.  The example illustrates the consequences of applying rules developed for a regulated monopoly market to a market with partial competition.  Results indicate that cost allocations developed for a regulated monopoly market, arbitrarily favor one industry over another and inhibit competition.

 

 

 

 

Copyright 2006, Converging Industries Research Foundation and Carol Weinhaus, Cambridge, MA.  All Rights Reserved.

 

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