This course examines both the underlying economics of the telecommunications and information industries and the rationale for and effects of regulations and other policies applied to those industries. It will cover the telecommunications industry and the possible providers of competitive services such as cable television and commercial data networks. Other issues to be examined will be the computer industry and its convergence with telecommunications, as well as the emergence of the national and global information superhighway.

Notes on Registration: The mechanics are that all hopeful students will fill out an 'application' on the first day of class which will be the basis of selection. (Commitment to complete the course will be a high priority because shoppers waste slots.) I will then pass out entry codes to those that are accepted.

Course Prerequisites: Microeconomics 100A or 101A or equivalent, either Economics 121 or 123 (previously or concurrently), AND consent of instructor. If these course requirements are not met, consent of the instructor is still possible, but unlikely if the course is oversubscribed.

Note for Graduate Students: With the permission of the instructor, you may take this course as INFOSYS 290: Section 5.

Reader: No text has been assigned. A reader will be available for purchase.

Assignments: One research paper, done individually or by a group of two, plus one class presentation. Details to be announced.

Check current enrollment information for L190-1.

Check current enrollment information for L290-5.

Office Hours: M 2-3 and Th 11-12; 203B South Hall;

Telephone: 642-2235; e-mail: yale@sims.berkeley.edu

TA: - Susan Oberlander, Telephone: 524-9853; e-mail: susano@info.berkeley.edu

I. Telecommunications Industry

A. Overview: Technology Basics and Economic Issues

Richard. Arnott, Bruce Greenwald and Joseph E. Stiglitz (1994) "Information and economic efficiency," Information Economics and Policy,. 77-88.

E.E. Zajak, "Is Telephone Service an Economic Right?" in , p. 94-109.

Eli M. Noam (1987) "The Public Telecommunication Network," Journal of Communication, 30-48.

Alfred E. Kahn (1984) "The Road to More Intelligent Telephone Pricing," Yale Journal of Regulation,. 139-157.

Jeffrey K. MacKie-Mason and Donna Lawson, "Local Telephone Calling Demand When Customers Face Optional and Nonlinear Price Schedules," Unpublished manuscript, May 1993, 33 pgs.

Kenneth E. Train (1993) "Intra-LATA toll elasticities," Telecommunications Policy , 707-712.

John T. Wenders, "Two Views of Applied Welfare Analysis: The Case of Local Telephone Service Pricing," in p. 340-348.

F.A. Wolak (1993) "Telecommunications demand modeling," Information Economics and Policy, 179-195.

N. Curien and M. Gensollen, "Network Externality: Its Impact on Growth and Pricing of the Telephone service," in p. 189-214.

Lewis Perl and Jonathan Falk, "The use of econometric analysis in estimating marginal cost," NERA, April 1989.

B. Regulation - Old and New

Harvey Averch and Leland L. Johnson (1962) "Behavior of the Firm under Regulatory Constraint," American Economic Review, 1052-1069.

E.E. Zajac (1970) "A Geometric Treatment of Averch-Johnson's Behavior of the Firm Model," American Economic Review, 117-120.

Timothy J. Tardiff and William E. Taylor, 'Telephone Company Performance Under Alternative Forms of Regulation in the US,' National Economic Research Associates, September 1993, 44 pgs.

Robert Crandall.., "The changing US telephone market" and "From regulation to competition to divestiture," in After the Breakup, 1991.

Sam Peltzman, "The Economic Theory of Regulation after a Decade of Deregulation," Brookings Papers: Microeconomics 1989, 1-41.

Roger G. Noll, "The Future of Telecommunications Regulation," Social Science Working Paper 432, California Institute of Technology, July 1982.

Roger G. Noll and Bruce M. Owen, "The Anticompetitive Uses of Regulation: United States v AT&T," in p. 290-337.

C. Divestiture - Before and After

David S. Evans and James J. Heckman (1984) "A test for subadditivity of the cost function with an application to the Bell system," American Economic Review, 615-623. With Erratum in `1986 American Economic Review, 856-858.

Yale M. Braunstein and Lawrence B. Pulley, "Economies of Scale and Scope in Telephony: Applying the Composite Cost Function to Bell System Data," Unpublished Manuscript, Aug 1995.

Dennis L. Weisman and Louis C. Gapenski (1993) "Imputation rules in regulated industries," Telecommunications Policy ,. 49-60.

Richard E. Simnett, "Contestable Markets and Telecommunications," in , p. 127-142.

Gerald R. Faulhaber (1995) "Public policy in telecommunication: the third revolution," Information Economics and Policy, 251-282.

Paul MacAvoy and Kenneth Robinson (1983) "Winning by losing: the AT&T settlement and its impact on telecommunications," Yale Journal of Regulation, 1-42.

Robert Crandall and Bruce Owen, "Economic implications of divestiture," in Disconnecting Bell, p. 47-70..

D. Competition in Local Exchange Markets

Douglas R. Mudd and Margarete Z. Starkey (1992) "Economic implication of collocation for the exchange access market," Telecommunications Policy,. 511-527.

Stanley M. Besen (1984) "The Regulation of Telecommunications Networks," The Information Society, 2, 359-380.

Robert G. Harris, Gregory L. Rosston and David J. Teece, "Competition and Unbundling in Local Telecommunications: Implications for Antitrust Policy," paper for the Telecommunications Policy Research Conference, October 1994, 39 pgs.

William G. Shepherd, "Mergers, Consolidations and Antitrust policies in Network-Based Markets," paper for the AEA Meetings, January 1996.

William Baumol and Greg Sidak, "Actual and prospective competition in local telephony," in Towards Competition in Local Telephony, 1993.

Glenn Woroch, "Turning the cables: a strategic analysis of cable entry into telecommunications," forthcoming in E. Noam, ed.., Globalism and Localism in Telecommunications (Elsevier Science, 1996).

Heather Hudson (1994) "Universal service in the Information Age," Telecommunications Policy 18, 658-667.

E. New Wireless Technologies

Jerry A. Hausman, "The Cost of Cellular Telephone Regulation," Unpublished manuscript, Jan 1995.

Bhaskar Chakravorti et al, "Auctioning the Airwaves: The Contest for Radio Spectrum," Unpublished manuscript, Jan 1994.

"A Survey of Telecommunications: End of the Line," The Economist, October 23, 1993.

F. International Carriage

Marcellus S. Snow (1987) "Natural Monopoly in Intelsat: Cost Estimation and Policy Implications for the Separate Systems Issue, Telematics and Informatics 4 ,133-150.

Leland L. Johnson (1989/91) "Dealing with monopoly in international telephone service: a US perspective," Information Economics and Policy 4, 225-247.

Cite to a new and good reference work: Robert M. Frieden, International Telecommunications Handbook, 1996.

G. International Cases

Eun-Ju Kim (1993) "Telecommunications development in the Republic of Korea," Telecommunications Policy,. 118-138.

Jae-Cheol Kim and Tae-Soek Ro (1993) "Current policy issues in the Korean telecommunications industry,' Telecommunications Policy , 481-492.

Janice Obuchowski, "Comparative Models in Telephony in Central and Eastern Europe: Mid-course in the Transition from Command to Market Economies," Annenberg Washington Program Conference, April 1995, 64 pgs.

K. Hayashi (1993) "Information Infrastructure: Who builds broadband networks?" Information Economic and Policy,. 295-309.

Paul S. N. Lee (1993) "Hong Kong as a communications hub," Telecommunications Policy ,. 475-480.

Roger G. Noll and Frances M. Rosenbluth, "Telecommunications Policy in Japan and the U.S.: Structure, Process, Outcomes," Center for Economic Policy Research Paper, May 1993.

II. Video, Television and Cable

A. History, Technology and Economics

R.H. Coase (1966) "The Economic of Broadcasting and Advertising," 441-447; David M. Blank, "The Quest for Quantity ;and Diversity in Television Programming," 448-446; Lester G. Telser, "Supply and Demand for Advertising Messages," 457-466; with discussion, 467-475 in American Economic Review.

Gary M. Fournier and Ellen S. Campbell (1993) "Shifts in broadcast policy and the value of television licenses," Information Economics and Policy 5, 87-104.

B. Horizontal Economies and Vertical Practices

Thomas G. Krattenmaker and Steven C. Salop (1986) "Competition and Cooperation in the Market for Vertical Exclusionary Rights," 76 American Economic Review, 109- .

Bruce Owen and P.R. Greenbaugh (1986) "Competitive policy considerations in cable television franchising," Contemporary Policy Issues, 4, 69-79.

Robert Crandall, "Economic analysis of market structure in the cable television business," draft manuscript, 1991.

Michael Salinger, " Public Policy Towards Vertical Integration in Cable," draft manuscript, Oct. 1990.

David Waterman and Andrew A. Weiss (1996) "The effects of vertical integration between cable television systems and pay cable networks," Journal of Econometrics 72, 357-395.

C. Regulation, Deregulation and Reregulation

Bruce Owen and Paul Gottlieb, "The rise and fall of cable television regulation," In Regulatory Reform: What Actually Happened, edited by Leonard Weiss and Michael Klass, 1986.

D. Competition for Video Delivery

Tom Hazlett (1990) "Rent-seeking in the telco/cable cross-ownership controversy," Telecommunications Policy,. 425-433.

Tom Hazlett (1990) "Duopolistic competition in cable television," Yale Journal of Regulation, 65-119.

Stanford Levin and John Meisel (1991) "Cable television and competition," Telecommunications Policy, 519-528.

Albert Smiley (1990) "Regulation and competition in cable television," Yale Journal of Regulation,121-138.

III. Computer Industry and Technology Convergence

A. The Computer Industry

Neil Gandal, Shane Greenstien and David Salant, "Adoptions and Orphans in the Early microcomputer Market," Unpublished Manuscript, January 1995.

"A survey of the computer industry: Within the whirlwind," The Economist, Feb 27, 1993.

Tim Bresnahan and Shane Greenstein, "Technological competition and the structure of the computer industry," Stanford CEPR Discussion Paper 315, June 1992.

B. Network Issues I: Externalities and Access

S.J. Liebowitz and Stephen E. Margolis (1994) "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, 133-150.

S.J. Liebowitz and Stephen E. Margolis (1995) "Are Network Externalities a New Source of Market Failure?" Forthcoming in Research in Law and Economics.

Nicholas Economides, "The Economics of Networks," Working Paper of Stern School of Business, NYU, Nov 1994.

Paul A. David, "Information Network Economics: Externalities, Innovations and Evolution," in The Economics of Information Networks, edited by Cristiano Antonelli, 1992.

Eli M. Noam, "A theory for the Instability of Public Telecommunications Systems," in The Economics of Information Networks, edited by Cristiano Antonelli, 1992.

Koichiro Hayashi, "From Network Externalities to Interconnection: The Changing Nature of Networks and Economy," in The Economics of Information Networks, edited by Cristiano Antonelli, 1992.

Luis Cabral, David Salant and Glenn Woroch, "Monopoly Pricing with Network Externalities," unpublished manuscript, May 1994.

C. Network Issues II: Technical Standards

Paul A. David, "Some new standard for the economics of standardization in the information age," in p. 207-239.

Paul A. David, "Clio and the Economics of QWERTY," AEA Papers and Proceedings May 1985, 332-337.

Paul A. David and W. Edward Steinmueller (1994) "Economics of compatibility standards and competition in telecommunication networks," Information Economics and Policy , 217-241.

S.J. Liebowitz and Stephen E. Margolis (1995) "Path Dependence, Lock-In and History," Journal of Law, Economics and Organization 11. 205-226.

Joe Farrell and Garth Saloner, "Competition, compatibility and standards: the economic of horses, penguins and lemmings," in Product Standardization and Competitive Strategy, edited by H. Gabe., 1987.

Yale Braunstein and Larry White (1985) "Setting technical compatibility standards: and economic analysis," The Antitrust Bulletin, 30, 337-355.

Stanley Besen and Garth Saloner, "Compatibility standards and the market for telecommunications services," in Changing the Rules, edited by R. Crandall and K. Flamm, 1989.

Glynn S. Lunney (1990) "Atari Games v Nintendo: Does a closed system violate the antitrust laws?" High Technology Law Journal, 29-70.

D. The Software Industry

Hal Varian, "Economic incentives in software design," draft manuscript, June 1993.

Kenneth Baseman, Frederick Warren-Boulton and Glenn Woroch, "Exclusionary Behavior in the Market for Operating System Software: The Case of Microsoft," forthcoming in D. Gabel & D. Weiman, eds., Opening Networks to Competition: The Regulation and pricing of Access (Kluwer, 1996).

E. The Information Superhighway

Gerald R. Faulhaber, "Pricing the Net: What Economists Do," paper for the Stanford Mini-Conference On Data Network Pricing, March 1995, 11 pgs.

Jeffrey K. MacKie-Mason and Hal R. Varian, "Pricing the Internet," Unpublished manuscript, April 1993.

Jeffrey K. MacKie-Mason and Hal R. Varian, "Some economics of the Internet," draft manuscript, 1993.

HR 3636, "National Communications Competition and Information Infrastructure Act of 1993," sponsored by Rep. Edward market, Nov 1993.

Rob Frieden, "Dialing for Dollars: Will the FCC Regulate Internet Telephony?" draft manuscript, 1996.

Eli Noam, "The Impending Doom of Common Carriage,"

Jonathan Blake and Lee Tiedrich (1995) "The National Information Infrastructure Initiative and the Emergence of the Electronic Highway," Federal Communications Law Journal 46,