Volume 1, Issue 1

Demsetz (1968) and Posner (1972) suggested competitive bidding as an alternative to natural monopoly regulation. Williamson (1976) and Goldberg (1976) argued that the problems of natural monopoly regulation are inherent in long-term investment under uncertainty. Long- and short-term franchising contracts may be more problematic than regulation. This paper reviews the literature and UK experience. It examines London Underground's recent long-term (thirty-year) contract for its electricity distribution network. This has avoided the Oakland CATV problems described by Williamson, but involves considerable resources to monitor. Competitive contracting seems feasible and advantageous versus public provision. Its merits versus utility regulation warrant further consideration.

Well-established economic principles show that regulated monopolies may have an incentive to act discriminatorily against rivals of their unregulated affiliates. This paper discusses some recent empirical evidence regarding discrimination in telecommunications. Specifically, it surveys anecdotal and systematic evidence that LECs discriminate against unaffiliated providers of mobile telephony. Evidence regarding discrimination by LECs against rival local phone companies is also discussed. At the same time, the evidence suggests that allowing LECs to enter cellular telephony may result in higher-quality or lower-cost cellular phone provision. These findings provide evidence that discrimination is a real phenomenon, and that there is a policy trade-off between preventing discrimination (by mandating separation) and realizing economies of scope.

In this paper I review the recent paper by DeGraba (2000) that proposes a version of Bill and Keep (called COBAK) as the efficient interconnection regime. I argue while the proposed interconnection regime is suitable for some types of interconnection it would be quite undesirable for others. I show that whether the COBAK approach is suitable for a particular type of interconnection depends on, among other things, the importance of network externalities and on the willingness of called parties versus calling parties to pay for calls.

In a critique of my paper outlining the Central Office Bill and Keep (COBAK) proposal, Wright (2001) offers two sets of conditions under which a COBAK interconnection regime would not lead to optimal utilization. While there could be conditions under which some interconnection regime other than COBAK would lead to higher social surplus measures in very simple models of telecommunications, the critique provides no evidence that these conditions would be empirically significant. This, along with the other considerations explained in the proposal and not considered in the analysis, continue to suggest that COBAK is an appropriate policy recommendation.

This paper reviews the recent literature on the economics of open source software. Two different sets of issues are addressed. The first looks at the incentives of programmers to participate in open source projects. The second considers the business models used by profit-making firms in the open source industry, and the effects on existing closed source firms. Some possible future research directions are also given.

I review two papers, addressing the issue of competition and quality determination in the market for Internet access services (Crémer, Rey, and Tirole (2000), Foros and Hansen (2001)). These two works come to seemingly opposite conclusions. After having summarized the two papers, I try to highlight what lies behind the differences in the results.