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    Networked Worlds:Telepho

    ny,Broadband

    Wireless

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    Convergence andChange

    Local TelephonesLong Distance Telephones

    CableRadio & TVInternetWireless

    Networks .. .

    Introduction

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    Local TelephoneServiceNatural

    Monopoly?Declining AverageCostsLow MarginalCostsRight-of-WayIssuesNetwork

    Effects

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    Local Service

    A B

    C

    Geographic Division ofMarkets

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    Regulation

    Common Carrier StatusLocal Telephone

    Service

    FCC, Utilities Commissions, Local Franchise Boards

    Reasonable and nondiscriminatory rates

    Limited liability.

    Open Access Rules

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    History

    1876 Telephone patented

    1878 Exchanges1889 Automated Exchanges1895 Main AT&T Patents expire; rates fall

    50% by 19071902 1002 cities had service; 451 had at least two

    providers1900s Bell Labs created; company patents

    improvements; company develops longdistance; competitors decline

    Local TelephoneService

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    History1910 Telephones become common carriers but not of each other. States introduce

    regulation1913 Consent decree: telegraph, local service,

    long distance separate monopolies1920s Bell Labs wins Nobel Prize1934 FCC created1947 Bell Labs invents transistor & wins

    second Nobel Prize1949 First government antitrust suit1956 First antitrust suit ends: AT&T blocked

    from competing outside telephony.1950s Snapshot: Ma Bell

    Local TelephoneService

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    History 1960s Bell Labs discovers cosmic microwave

    background, wins third Nobel Prize

    1960s Competitors fight AT&T on right tocompete on equipment, long distance

    1974 Second government antitrust suit1984 Breakup; competition in long distance and

    equipment; Baby Bells.

    1996 Telecommunications Act introducesLocal Competition

    Local TelephoneService

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    Create"Competition"?Regulating Consumer

    PricesRegulating

    Competitors' Costs

    vs.

    Does "OpenAccess"

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    Long DistanceServiceNatural

    Monopoly?Declining AverageCostsLow Marginal

    Costs

    Right-of-WayIssuesNetwork

    Congestion!

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    Long Distance

    A B

    C

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    Cable

    NaturalMonopoly?Declining AverageCostsLow Marginal

    CostsRight-of-WayIssuesNetworkEffects

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    Cable

    A

    Geographic Division ofMarkets

    Neighborhood-by

    B

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    Cable1940s Local service for rural areas

    1950s 1960s FCC regulates cable to carry localstations, protect UHF, preventsiphoning, and fund public serviceprograms

    1972 Consensus Agreement liberalizesrestrictions while micromanagingwhat cable stations can do.

    1970s Consensus Agreement becomesunmanageable

    1977-79 Court challenges erode FCCs abilityto require cable to carry local signals,prevent siphoning.

    1980 Deregulation

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    1984 Cable Communications Policy Act lets FCC waiverate regulation where effective competitionexists. Local government cannot grant exclusive

    licenses.Open access: Must carry content from competitors

    on common carrier basis.

    1992 Cable TV Consumer Protection & Competition

    Act lets local authorities set prices for basic service inmost cases. Act ends state regulation of non- basicservice.

    Local governments cannot charge exorbitant fees.

    Cable

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    TV & Radio

    NaturalMonopoly?

    Declining AverageCostsLow MarginalCostsRight-of-Way

    IssuesNetwork

    LimitedSpectrum

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    A BThe Internet

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    Internet ServiceNatural

    Monopoly?Just Like LongDistance?Network Effects?AT T v. C i ty o fPo r t l andStates Cannot Demand Open Access of Broadband

    FCC is studying the issue.

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    A B

    Network

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    Backbone

    LastMileLast 100Feet

    Middle Mile

    Chokepoints

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    The Last 100 feetTelephones

    Wireless

    Cable

    Satellite

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    Wireless

    Hedy Lamarr (1913-2000)

    DoesThisWomanLookFamiliar?

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    FrequencyHopping

    Inventor &Movie Star

    Any girl can be glamorous.All you have to do is stand stilland look stupid.

    Hedy Lamarr (1913-2000)

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    Technologyireless

    Wires vs. Broadcast

    Radio, Cellular,& Time Division

    Multiplexing

    Smart Transmitters

    Frequency Hopping

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    NetworkExternalities?

    WithinCountries?AcrossCountries?

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    Picking Winners

    -- Orphaned Users

    -- Reaching Equilibrium Efficiently

    - Duplicated Development

    - Fragmented/Technically InferiorWinners

    Issues

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    Picking Winners, ctd.

    -- Network Effects

    -- Choosing Wrong

    -- Antitrust Dangers

    Issues

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    SchumpeterianCompetitionExport

    Markets

    Issues

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    Wireless

    USA

    FCC RegulationFirst Generation

    Second Generation

    Advanced Mobile Phone

    Standard (AMPS)

    GSM, DAMPS/TDMA

    Qualcomm CDMA

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    Wireless

    USA

    Third Generation

    CDMA 2000

    and

    W-CDMA

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    Wireless

    EuropeFirst Generation:

    National Bodies

    National Systems:

    TACS (UK), RC-2000 (France),Netz B (Germany), RTMS (Italy),NMT-450 (everywhere else).

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    Wireless Europe

    Second Generation:

    European TelecommunicationsStandards Institute (ETSI)

    Standard for Mobile (GSM).

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    Wireless Europe

    GSM Conquers The World !!!

    105 countries

    Not Western Hemisphere

    60% of Worldwide sales.

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    Third Generation:

    W-CDMA

    Backward Compatible to GSM

    Incompatible With Qualcomm

    CDMA

    Less Capacity, More Interference!

    Wireless E