Competition in Telecommunications

From Munich Lectures in Economics

Competition in Telecommunications

By Jean-Jacques Laffont and Jean Tirole





Theoretical models based on the assumption that telecommunications is a natural monopoly no longer reflect reality. As a result, policymakers often lack the guidance of economic theorists. Competition in Telecommunications is written in a style accessible to managers, consultants, government officials, and others. Jean-Jacques Laffont and Jean Tirole analyze regulatory reform and the emergence of competition in network industries using the state-of-the-art theoretical tools of industrial organization, political economy, and the economics of incentives. The book opens with background information for the reader who is unfamiliar with current issues in the telecommunications industry. The following sections focus on four central aspects of the recent deregulatory movement: the introduction of incentive regulation; one-way access (access given by a local network to the providers of complementary segments, such as long-distance or information services); the special nature of competition in an industry requiring two-way access (whereby competing networks depend on the mutual termination of calls); and universal service, in particular the two leading contenders for the competitively neutral provision of universal service: the use of engineering models to compute subsidies and the design of universal service auctions. The book concludes with a discussion of the Internet and regulatory institutions.

Copublished with the Center for Economic Studies and the Ifo Institute.


Out of Print ISBN: 9780262122238 336 pp. | 6 in x 9 in 20 illus.


$50.00 X ISBN: 9780262621502 336 pp. | 6 in x 9 in 20 illus.


  • This book does an outstanding job of explaining how economic theory can help improve regulation of telecommunications. The authors capture the interaction of competition and regulation in a very sophisticated manner. I recommend the book to economics students, regulators, and other business people and government officials with an interest in telecommunications.

    Jerry A. Hausman

    MacDonald Professor of Economics, MIT

  • This book is as systematic, probing, and original an exploration of the important regulatory issues as one can hope for. The authors demonstrate the great analytic competence for which they are deservedly noted.

    William J. Baumol

    Director, C.V. Starr Center for Applied Econoimcs, New York University

  • This book is masterful application of the best of economic theory to central issues in telecommunications policy. Throughout, Laffont and Tirole capture the essence of complex issues succinctly and elegantly, without compromising rigor or accessibility. Anyone interested in telecommunications, or in the transition from regulated monopoly to competition more generally, will benefit tremendously from this book.

    Marius Schwartz

    Professor of Economics, Georgetown University

  • Laffont and Tirole show that the tools of economic analysis, when applied with exceptional skill and concern for the facts, can illuminate the difficult policy problems that crop up along the road to competition in telecommunications. This book will quickly become a standard reference.

    Richard Schmalensee

    Dean, MIt Sloan School of Management

  • Laffont and Tirole have combined their mastery of economic theorywith real-world telecom know-how to produce a gem of a book. If youwant to deepen your understanding of telecom—and of networkindustries generally-you must read this book.

    Carl Shapiro

    Transamerica Professor of Business Strategy, University of California, Berkeley, and author of InformationRules: A Strategic Guide to the Network Economy