Telephone Company Entry into Cable Television

Competition, Regulation, and Public Policy

by Leland Johnson

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This study explores the potential consequences of recent decisions by the Federal Communications Commission to permit local telephone companies to compete with cable television operators and other video suppliers in providing video service. The goal of the study is to provide inputs useful to policymakers in their continuing deliberations about the rules under which telephone companies should be permitted to participate in a video marketplace characterized by striking technological advances, rapidly evolving market structures, and changing social needs. The report focuses on the likely consequences of the FCC decision and the recommendation that local exchange carriers (LECs) be permitted to go beyond provision of video dial tone. It is especially concerned with the prospects for competition with cable operators, the role for existing or new regulatory safeguards, and issues of public policy. To explore the potential for competition, the study describes four scenarios involving a hypothetical LEC and a hypothetical cable company operating in the LEC's territory. The scenarios, set later in this decade and into the next century, describe how the two entities behave in response to alternative regulatory, economic, and technological conditions.

This report is part of the RAND Corporation monograph report series. The monograph/report was a product of the RAND Corporation from 1993 to 2003. RAND monograph/reports presented major research findings that addressed the challenges facing the public and private sectors. They included executive summaries, technical documentation, and synthesis pieces.

This research in the public interest was supported by RAND, using discretionary funds made possible by the generosity of RAND's donors, the fees earned on client-funded research, and independent research and development (IR&D) funds provided by the Department of Defense.

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