Contracts that impede entry by more efficient telecommunications rivals

Contracts that impede entry by more efficient telecommunications rivals

Stanley Besen, Bridger M. Mitchell
Antitrust & Competition

Incumbent local telecommunications companies provide data services to business customers through “special access” contracts containing loyalty terms and conditions, including minimum purchase requirements, long contract terms, and “all-or-nothing” provisions. When these conditions are not met, customers face a wide range of “taxes” on purchases from rival suppliers, including both monetary payments and the loss of valuable benefits. The incumbent suppliers have large market shares, so that the contracts are especially likely to discourage entry by more efficient rivals. Regulatory actions by the FCC would have prohibited some provisions of loyalty contracts, but they would not have barred contract conditions based on mar-ket shares or imposed penalties based on suppliers’ expected revenues, and even those pro-competitive regulations were subsequently withdrawn. As a result, terms and conditions in Incumbent Local Exchange Carrier (ILEC) special access con-tracts continue to impose barriers to entry by more efficient rivals.

Minnesota Journal of Law, Science & Technology