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.
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