Week 1

Question 1

Network Effects

Answer 1

The more people use it, the more valuable it is.

This does not apply to all industries.

Question 2

Economies of Scale

Answer 2

The more customers using it, the less expensive it is for everybody.

Bulk of the costs are up front, marginal costs are small.

Question 3

Regulation (4 points)

Answer 3

• rules imposed externally/internally
• routines
• maintain expected performance
• rules imposed under legislation

Question 4

Myths about regulation

Answer 4

• regulations are not laws, they are a METHOD for applying laws
• regulation is often requested, not imposed on the industry by the government
• regulations do not make the industry less profitable
• de-regulation does not result in less tape
• regulated industries won’t necessarily act more in public interest

Question 5

Advantages to regulation as policy choice

Answer 5

• responsiveness
• flexibility
• specificity
• arms-length

Question 6

Disadvantages to regulation as policy choices

Answer 6

• image: seen as “red tape”
• political cost of compliance
• maintenance costs

Question 7

The Veil Doctrine

Answer 7

invoked when shareholders blur the distinction between shareholders and corporation.

Question 8

Telecommunication

Answer 8

The art of conveying information from a distance.

Question 9

How can we understand network effects in regards to the emergence of the telephone?

Answer 9

When the telephone first emerged companies refused to interconnect with each other, as a result customers would have to choose which telephone company they went with based on who their friends were with.

Therefore, the telephone company with the most customers was the most valuable.

Question 10

Why is it more expensive to offer fixed broadline service in rural areas rather than urban?

Answer 10

Economies of Scale

There are large costs to pay upfront, and small costs marginally. The more customers there are the cheaper it is for everybody to share the costs. But to get everything out there for so few customers results in it being expensive.

Question 11

Telecoms 1.0 according to Noams

Answer 11

• traditional monopoly

- state owned or tightly regulated

Question 12

Telecoms 2.0 according to Noams

Answer 12

• competition leads to innovation leads to deregulation

- government intervention is an issue to be overcome