[...]... objections of their competitors.20 Arguing powerfully on the other side, however, has been the dramatic reversal of the industry’s fortunes and the apparent inevitability of substantial curtailment in either the number of hub -and- spoke carriers or the scope of their separate operations I had argued, in opposition to the UAL-US Airways merger, that if United felt its ability to compete in the Northeast would... mergers: what the antitrust agencies attempt to do in those quasi-regulatory negotiations is, in principle, identical—to eliminate the aspects of the restructuring effected by the merger that in their judgment threaten competition.37 Setting aside the questions of their adequacy, on the one hand, and their likely thwarting of the full benefits of vertically integrated pricing, on the other, the conditions... attempt to preserve the artificially elevated prices needed to finance cross-subsidies—an attempt promptly abandoned in the case of the airlines5 3—has artificially stimulated competitive entry and is therefore partly responsible for the cycle of boom and collapse over the last several years —Again as in the case of airlines, the unintended adverse consequences of deregulation in telecommunications not... reason to re-regulate and re-cartelize the industry; they counsel an early abandonment of oxymoronic efforts to promote competition by regulation The Role of the AT&T Divestiture and Its Gradual Reversal Whether or not the breakup of AT&T and the associated exclusion of the surviving Baby Bells from long-distance service was necessary to generate the benefits of regulatory reform, there can be no dispute... intentionally left blank Lessons from Deregulation This page intentionally left blank 1 Introduction I t’s no secret that during the last two to three years both the airline and the telecommunications industries have experienced catastrophic declines in the value of their securities.1 Since these industries were among the most important and most visible—to have been unleashed from regulation in recent... percent of the code-share flights must either meet that requirement or be to or from small hub and non-hub airports The condition limited the total number of code-sharing flights between Delta and Continental and between Delta and Northwest to 2,600 (but does not affect the existing code-sharing between Continental and Northwest) We committed ourselves to reviewing these restrictions after the first... equal access to the facilities of the local companies contributed substantially to the success of competition in long-distance service over the last two decades.54 There is no need to rehash the arguments over the adequacy of the competition that arose as the local Bells sought the right to offer interLATA (local access and transport area) toll service—notably, the question of whether the declines in... merger and code sharing.17 And this inevitably raises the question whether such efforts violate the letter or spirit of the antitrust laws Initially, the industry requested exemption from those laws to permit its members to act collectively to reduce their operations in response to the combination of recession and September 11 Since that would have entailed a complete reversal of deregulation one of the. .. widely differing degree), their wrenching experience has understandably raised the question of whether their deregulation should be reconsidered or even reversed.2 The airlines were comprehensively deregulated in 1978 in one bold stroke Six years later, the Civil Aeronautics Board (CAB), the government apparatus for controlling domestic fares and routes, was abolished And although the wisdom of that change... charged no more than the stand-alone costs of serving them.26 With the current shrinkage of hub operations, it seems to me equivalently important to permit the hub -and- spoke carriers to preserve and enhance the economies of scope inherent in their particular mode of operations These economies have lowered prices for customers with highly elastic demand (think, vacationers) and improved the frequency of . alt="" Lessons from Deregulation 00 4819-1_FM.qxd 11/12/03 12:10 PM Page i This page intentionally left blank Lessons from Deregulation Telecommunications and Airlines after the Crunch Alfred. Alfred E. (Alfred Edward) Lessons from deregulation : telecommunications and airlines after the crunch / Alfred E. Kahn. p. cm. Includes bibliographical references and index. ISBN 0-8157-4819-1. Remedies 21 The Unequivocal Successes of Deregulation 21 The Role of the AT&T Divestiture and Its Gradual Reversal 23 The Growth of Local Competition 25 The Bubble Bursts 26 The Apportionment