The costs and benefits of long-distance entry: Regulation and non-price discrimination

A primary goal of the 1996 Telecommunications Act is to encourage competiti on in long-distance telephone markets. Four years after passage of this leg islation, Bell Operating Companies ("BOCs'') have been granted permission t o offer long-distance services in only one state. The regulatory barrier to entry is justified on grounds that the BOCs have the ability to discrimina te against incumbent long-distance carriers in the provision of essential a ccess services. We take this premise as given and quantify the critical lev el of discrimination required to offset the positive consumers' surplus gai ns associated with the enhanced competition resulting from BOC entry into l ong-distance markets.