Review of Industrial Organization 15: 93–95, 1999.
Opening Networks to Competition: The Regulation and Pricing of Access. David
Gabel and David Weiman, editors. Boston: Kluwer Academic Publishers, 1998,
245 pages, $100.
This book offers a combination of theoretical analyses and historical case studies to
inform and illustrate the public debate over network competition. The principal fo-
cus is on the terms on which access to a network is granted by an incumbent to new
entrants who may compete with the incumbent. This is an increasingly important
topic, and moreover, one that illustrates just how much the profession’s thinking
on the workability of competition continues to change. The three analytical pieces
that comprise Part 1 are nicely done. However, for those looking to be educated
in the basic economics of networks, these three papers will probably best serve as
auxiliary reading to the more complete expositions that appear elsewhere in the
literature. The seven case studies that comprise Part 2 are somewhat more useful,
especially from the perspective of teaching undergraduates. Indeed, some of these
insightful pieces would make a very useful addition to the typical reading list found
in classes on regulation and antitrust.
The ﬁrst paper is an analytical presentation of what is meant by a network
and the special economic issues that networks raise. The authors are Nicholas
Economides and Larry White, and it would be hard to imagine two economists
more qualiﬁed to write on this topic. These two noted economists do a nice job
of explaining what are networks, and the distinction between two-way networks
in which services ﬂow in both directions (e.g., telephones and railroads), and one-
way networks in which services primarily ﬂow in only one direction (e.g., ATMs
and television). They then go on to outline brieﬂy the major issues that arise in
connection with network competition. These include the issue of access, but also
include the tensions inherent in establishing compatibility and setting technical
standards, on the one hand, and preserving competition on the other. The similar
tension that emerges in the public policy treatment of mergers and joint ventures is
also discussed. All in all, this is a very nice introductory piece. Its main limitation
is the terse style in which it is written. Considerable material is covered in this
chapter and those without much prior background or without ancillary reading will
ﬁnd the density with which that material is packed to be a bit daunting.