TACIT COLLUSION UNDER REGULATION IN THE PRICING OF INTERSTATE LONG-DISTANCE TELEPHONE SERVICES

Analysis of seven wholesale and retail markets for long-distance telep hone services since the AT&T divestiture indicates that service provid er concentration declined in the later 1980s and then stabilized in th e 1990-1993 period. In addition to this stability in market shares, a number of other conditions established since 1990 have been conducive to the development of market sharing rather than significant price com petition. The most important of these conditions has been the tariffin g process of the Federal Communications Commission fry which MCI and S print replicate AT&T's price announcements. As market shaves stabilize d and became more equal, and as regulation formalized the price-settin g process, the price-cost margins of the three large carriers increase d and became more nearly identical. These results are consistent not w ith price competition but rather with emerging tacit collusion among A T&T, MCI, and Sprint.