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Handbook of Telecommunications

Book Reviews Economics,Volume1. Structure,


Regulation & Competition.
Cave, M., Majumdar, S. & Vogelsang (eds.).

Rating Criteria
reviewed by Todd Chambers

Theoretical Approach/ The economic landscape of telecommu- ics. Specifically, most of the chapters
Methodology nications industries is changing at both focus on the core issues in industrial or-
Has the book a theoretical ap- the local and global level. Shifts in regu- ganization economics. In the Structure
proach? Is the applied method- latory practices, technological innova- section, the editors have selected excel-
ology useful for the author’s ob- tions and consumer demand have al- lent chapters ranging from the histori-
jectives? Is the context of the tered the traditional structures of the cal development of telecommunications
information clear? Is the publi- telephone, cable and related telecom- industries to the effect of monopoly and
cation positioned within exist- munication network industries. In competition on various pricing mecha-
ing literature? Are the terms their Handbook of Telecommunica- nism. The Regulation section delivers
clearly defined? Is the informa- tions Economics, Volume 1, editors Mar- technical instruction and examples of
tion consistent? tin Cave, Sumit Majumdar and Ingo the various effects of different regula-
Vogelsang have collected a series of tory frameworks on such issues as access
Structure chapters examining the structure, regu- pricing, interconnection and universal
How does the chosen structure lation and competition in the telecom- service. The final section, Competition,
help to understand the informa- munications industry. Overall, this is devoted to theoretical and practical
tion? book provides the reader with an excel- explanations of competition in the long
lent historical and current summary of distance, wireless, mobile telephone
Depth of the Analysis the economic issues facing network in- and local networks industries.
Is the content sufficient to ex- dustries such as local exchange carriers
plain the described phenom- (LECs), cable television providers, mobile Although the book is filled with valu-
enon? telephones, Internet Service Providers able explanations about the economics
(ISPs), long distance telephone compa- of telecommunications, there are three
Contribution nies and others. This review will provide chapters that are noteworthy. In a chap-
to New Knowledge a brief summary of the book and its ter called “Network Effects,” Liebowitz and
How does it contribute to exist- findings as well as highlighting some of Margolis explain the literature concern-
ing knowledge? Does it use up- the implications for future research in ing network externalities and offer a
to-date data? the economics of telecommunications. detailed analysis of the difference be-
tween network effects and externalities.
Applicability From a research perspective, the Hand- Positive and negative, direct and indi-
Is the content useful? Does it book focuses on theory and research rect network effects can and do have
help in solving practical prob- from the area of industrial organiza- interesting policy implications for the
lems? tion economics. Throughout the book, future of telecommunications net-
the editors have included extensive works. In general, network externalities
www.mediajournal.org

Clarity and Style chapters that highlight issues of both have been defined “as the number of users
of Writing telecommunications and economics. of a product or increases, the value of the
Are the ideas presented in a From an organization perspective, the product or network to the other users
clear and comprehensible way? textbook is divided into three sections changes” (p. 76). The authors point to the
Are specific and illustrative ex- – Structure, Regulation and Competi- fact that networks, like individuals, ‘in-
amples given? Is the informa- tion. In each of the sections, there are ternalize’ network effects which make
tion concise? thorough explanations of the relevant them no longer ‘external’. The authors
topics in telecommunications econom- conclude this chapter by highlighting

68 © 2002 – JMM – The International Journal on Media Management – Vol. 5 – No. 1


the problem with misusing the concept industrial information from the United and performance of telecommunica-
of externalities in antitrust cases and States. Although some readers may tions industries. From policies govern-
other types of policy decisions. want more global examples of policy ing the ownership of these industries
effects, most of the contributors spend to policies related to consumer pricing,
A second noteworthy chapter outlines time attempting to explain the findings each type of regulatory framework had
the different forms of incentive regula- in both an American and international positive and negative impacts on the
tions and provides several examples of perspective. In addition, there is some public. New distribution systems and
the effects of various regulatory frame- duplication in chapters dealing with emerging consumer demand for broad-
works on prices. In the chapter, “Price the development of telecommunica- band access will have short- and long-
Regulation,” David Sappington defines tions policy in the United States found term impacts on the development of
incentive regulation, provides the ad- in various sections of the book. competition policies throughout the
vantages and disadvantages to the dif- world. The entry of cable television pro-
ferent regulatory frameworks, and dis- Overall, the Handbook of Telecommu- viders into the local exchange market-
cusses the various alternatives and nications Economics provides an excel- place will alter the structure, conduct
implications under each type of incen- lent summary of current research find- and performance of the telecommuni-
tive regulation framework. Sappington ings from various methodological cations marketplace. In addition, tech-
provides specific formulas and examples frameworks. Collectively, while this ed- nological innovation of IP technologies,
for estimating the effects of these types ited volume provides readers interested DSL and other types of distribution sys-
of plans. In addition, Sappington high- in the area of telecommunications eco- tems will force government regulators
lights the problem with making as- nomics with valuable definitions of ba- and traditional providers to strategi-
sumptions about long-term impacts of sic economic terms such as natural cally react in an increasingly competi-
such policies with short-term data. monopoly and consumer welfare, it tive marketplace. The Handbook of Tele-
provides sophisticated analyses of the communications Economics equips
In the Competition section, the editors theoretical issues related to the regula- readers for the economic changes that
included an interesting chapter outlin- tion and deregulation of telecommuni- are on the horizon.
ing the process and policies of spec- cations markets. The majority of the
trum auctions. In the chapter, “Spectrum chapters are written for those who have Rating
Auctions,” Peter Cramton outlines the some understanding of economics.
Rating Criteria Rating
development of spectrum auctions, From an academic perspective, the
analyzes the different types of bidding Handbook would be appropriate for a Theoretical Approach / Methodology ++++
procedures and provides recommenda- graduate course covering topics in the
Structure +++
tions to governments using spectrum broad area of telecommunications, tele-
auctions. As a relatively recent phenom- communications networks and/or tele- Depth of the Analysis +++++
enon, spectrum auctions continue to communications economics. Scholars
Contribution of new Knowledge +++
evolve into a sophisticated bidding pro- will appreciate the scope and variety of
cess filled with economic advantages information as well as the potential for Applicability ++++
and disadvantages for both government future research.
Clarity and Style of Writing ++++
agencies and interested telecommuni-
cations parties. Government agencies As new technologies and telecommuni- Rating Points: excellent: +++++ poor: +
need to weigh the various opportuni- cations networks continue to develop,
ties and drawbacks to open-, single- policy makers and consumers will
sealed and package-bidding designs for grapple with the positive and negative Elsevier Science, B.V., 2002
spectrum auctions. In addition, effects of regulation and deregulation.
Cramton uses examples from the From a historical perspective, govern- 726 pages
United States, Europe and Asia. ment regulatory frameworks have
accompanied the development of ISBN 0-444-50389-7
www.mediajournal.org

Throughout the book, the authors at- telecommunications infrastructures


tempted to provide a global perspective throughout the world. For most of the www.elsevier.com
on telecommunications economics. 20th century, the Federal Communica-
While most of the chapters mention the tions Commission, as well as other gov-
Review Author
policies from other governments, there ernment agencies at the federal, state
is little empirically-inspired research to and local levels and the legal system, Todd Chambers
support the same type of conclusions experimented with regulation and de- Texas Technical University, U.S.A.
that can be found from literature using regulation in the structure, conduct todd.chambers@ttu.edu

© 2002 – JMM – The International Journal on Media Management – Vol. 5 – No. 1 69

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