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The New Rivalry in Infrastructure

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Industry Structure and Pricing

Part of the book series: Studies in Industrial Organization ((SIOR,volume 22))

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Abstract

Chapter 1 explains the basic economic models that economists use to analyze utility markets. These models focus on how customer preferences, customer income, firm costs, and in-market strategic interactions constrain the choices firms make and determine the effects of firms’ choices. Chapter 1 concludes by illustrating that all of these models, with the primary exception of the Hotelling circle model, exclude strategic interactions outside the markets of the firm of interest. This exclusion affects the usefulness of these models for today’s utility markets because, as this chapter illustrates, today’s utilities operate in diverse markets and often face different sets of actual and potential rivals in each market. These diverse patterns of actual and potential rivalry, which I identify as multilateral rivalry or MLR in Chapter 1, affect firms’ choices of markets, products, quality, and prices. As I explain in Chapters 3–6, the effects on economic models are particularly pronounced in competition for the market, where policy makers have applied contestable market theory.

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Endnotes

  1. Figure 1 is adapted from Sappington and Weisman (1996, p. 22).

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  2. The Modification of Final Judgement (MFJ) divided the US into 160 local access transport areas or LATAs. (United States v. Western Electric Company, Inc., 525 F. Supp. 1336, 1353–7 (D. D.C. 1981); hereafter, MFJ.) Under the terms of the MFJ, Bell Operating Companies are generally prohibited from carrying calls across LATA boundaries. (MFJ, 552 F. Supp. at 229, §IV.(K).)

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  3. International long distance has effectively provided income to governments because the companies have been state owned.

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  4. In most countries, the cash flow from long distance to cover local network costs has been hidden because a single company provided both local and long distance.

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  5. “Data Beats Voice on BT Lines,” Financial Times, 5 November 1998.

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  6. Adapted from Jamison (1999, p. 21). Sources: Treasury Department (1998, Tables 2, 723, 914, 921, 929, and 930); Federal Communications Commission (1998, p. 16); and Collis, Bane and Bradley (1997).

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  7. Adapted from Jamison (1999a, p. 22).

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  8. “Enjoying the Convergence Game,” Financial Times, 9 June 1999.

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  9. “Italians Fall in Love with Mobile Phone,” Financial Times,13 August 1999. “ Adapted from Jamison (1999a, pp. 22–26).

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  10. “Inside the Tangles of AT&T’s Web Strategy,” The Wall Street Journal, 13 August 1999, Eastern Edition.

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  11. “Sprint PCS Plans Wireless Data Net, Linking Cell Phones, Access to Internet,” The Wall Street Journal, 12 August 1999, Eastern Edition.

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  13. Willig addressed the issue of how AT&T should price connections to its fledgling competitor, MCI. Baumol addressed the issue of how a larger rail system should price access to a competitor that wants to compete for a portion of the market.

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  14. Figure 5 is adapted from Porter (1985, p. 354).

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  15. Investments listed represent stakes greater than or equal to 20% ownership.

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  16. Since then, BellSouth has made several major investments in Latin American cellular markets.

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  19. “Time Wamer Sells Stake in Titus,” Financial Times,2 July 1999.

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  24. “Mobile-Phone Companies Target Korea,” The Wall Street Journal, 9 November 1998, Eastem Edition.

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  25. Commonwealth Telephone Enterprise was previously a rural telephone company operating near Bell Atlantic’s exchanges.

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  30. “Microsoft to Buy 11% Stake in Globo Cabo,” The Wall Street Journal, 17 August 1999, Eastem Edition.

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  33. “Enjoying the Convergence Game,” Financial Times, 9 June 1999.

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  34. Qwest Communications International is a new entrant that initially provided international fiber optic networks.

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  35. “Qwest is Set to Announce Accord with KPMG for Services on Web,” The Wall Street Journal, 21 June 1999, Eastern Edition.

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  44. “AirTouch Set to Decide Winner in $55bn Battle,” Financial Times, 16–17 January 1999.

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  45. Except in the case of undersea cables, investments of less than 20% ownership are omitted. An exception is made for undersea cables because large consortiums often share them.

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  46. “MediaOne Group and Cable & Wireless Agree Sale of One 2 One To Deutsche Telekom for Total 8.4 Billion British Pounds,” PRNewswire, 6 August 1999.

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  47. Adapted from Hunt and Shuttleworth (1996, p. 32).

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  48. Adapted from Juris (1999b, Figure 2).

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  49. Adapted from Juris (1999b, Figure 3).

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  50. “AES to Buy British Plant for $3 Billion,” The Wall Street Journal, 19 August 1999, Eastern Edition.

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  51. “Cablevision Files Suit Alleging Violations by BEC Energy Unit,” The Wall Street Journal, 15 December 1998, Eastern Edition.

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  52. “How U.S. Companies and Suharto’s Circle Electrified Indonesia,” The Wall Street Journal, 23 December 1998, Eastern Edition.

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  53. “AES is Planning to Buy Cilcorp for $885 Million,” The Wall Street Journal, 23 November 1998, Eastern Edition.

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  54. “Electricity and Natural-Gas Companies are Again Looking for Merger Partners,” The Wall Street Journal, 23 February 1999, Eastern Edition.

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  55. “Carolina Power & Light to Buy Florida Progress for $5.3 Billion,” The Wall Street Journal, 23 August 1999, Eastern Edition.

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  56. “Electricity and Natural-Gas Companies are Again Looking for Merger Partners,” The Wall Street Journal, 23 February 1999, Eastern Edition.

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  57. “Duke Energy, in Latin America Push, Is Buying Dominion Resources Assets,” The Wall Street Journal, 3 August 1999, Eastern Edition.

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  58. “Duke Energy to Buy A Controlling Stake in Salvadoran Plants,” The Wall Street Journal, 2 August 1999, Eastern Edition.

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  59. “Duke Energy Agrees to Buy BHP Power in a $315 Million Deal,” The Wall Street Journal, 18 December 1998, Eastern Edition.

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  60. “Duke Energy Agrees to Pay $1.35 Billion for Gas Unit of Union Pacific Resources,” The Wall Street Journal, 23 November 1998, Eastern Edition.

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  61. “El Paso Energy Corp. Has Big Power Plans in the Pipeline,” The Wall Street Journal, 26 July 1999, Eastern Edition.

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  62. “Enron to Unveil Pact Involving RealNetworks,” The Wall Street Journal, 21 January 1999, Eastern Edition.

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  63. “Water Business is Hot as more Cities Decide to Tap Private Sector,” The Wall Street Journal, 9 November 1998, Eastern Edition.

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  64. KeySpan is a US generator of electricity and distributor of natural gas.

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  65. “KeySpan Seeks to Make Telecommunications a Core Business,” The Wall Street Journal, 29 July 1999, Eastern Edition.

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  66. “Groups Sign ‘Minor’ Phone Deals in Brazil,” Financial Times, 19 January 1999.

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  67. “National Power to Build 2 U.S. Plants,” The Wall Street Journal, 6 July 1999, Eastern Edition.

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  68. “Electricity and Natural-Gas Companies are Again Looking for Merger Partners,” The Wall Street Journal, 23 February 1999, Eastern Edition.

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  69. “Scottish Power Deal could Mark Start of Utility Invasion,” The Wall Street Journal, 8 December 1998, Eastern Edition.

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  70. “Microturbin + fuel cell = CC-level efficiency,” Power, March/April 1999.

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Author information

Authors and Affiliations

  1. Public Utility Research Center, University of Florida, Gainesville, Florida, USA

    Mark A. Jamison

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  1. Mark A. Jamison
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© 2000 Springer Science+Business Media New York

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Jamison, M.A. (2000). The New Rivalry in Infrastructure. In: Industry Structure and Pricing. Studies in Industrial Organization, vol 22. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-5456-8_2

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  • DOI: https://doi.org/10.1007/978-1-4757-5456-8_2

  • Publisher Name: Springer, Boston, MA

  • Print ISBN: 978-1-4419-4957-8

  • Online ISBN: 978-1-4757-5456-8

  • eBook Packages: Springer Book Archive

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