Explicating barriers to entry in the telecommunications industry Eun-A Park Abstract Purpose – The purpose of this paper is to examine economic debates over the conception of barriers to entry and speculates which definitions can be applicable to the telecommunications industry, more specifically, the residential broadband market. Also, it seeks to clarify the various industrial factors that could prevent or mar the success of entry into the residential telecommunications market and it also seeks to introduce an analytical framework that can be adopted for evaluating the barriers to entry. Design/methodology/approach – The approach takes the form of a literature review. Findings – It clarifies the various industrial factors that could prevent or mar the success of entry into the residential telecommunications market and introduces an analytical framework that can be adopted for evaluating the barriers to entry. Originality/value – Although market entry barriers are crucial industrial factors that influence the market share and profit of firms already in the market, very little research has specifically examined barriers in the telecommunications and broadband industry. Keywords Broadband networks, Telecommunication services, Business development Paper type Conceptual paper 1. Introduction Barriers to entry are factors that halt or make it difficult for new competitors to successfully enter a market in which they have not previously competed. Barriers-to-entry has been one of critical factors determining a market structure (Carlton and Perloff, 2005). Assessing whether or not there are entry barriers in a certain industry has been one of the critical methods for examining the presence of market power of the incumbents as well. Since a variety of entry barriers to a market will cause prices to increase greater than marginal cost and deter the entry of more efficient companies, it is detrimental to allocative efficiency and productive efficiency (Carlton and Perloff, 2005; Blees et al., 2003). Historically, the telecommunications networks have been distinguished from other manufacturing-based industries due to its unique characteristics such as the presence of essential facilities, sunk cost, economies of scale and network externalities (Brock, 1981). In particular, the residential broadband market has been criticized for its inherent duopoly market structure typically dominated by telephone companies and cable network operators and the following inefficiencies that may explain a dull penetration rate of residential broadband service in the USA (Scott and Aaron, 2005; Cooper, 2005; Kimmelman, 2005; Besing, 2005; Bleha, 2005; Ferguson, 2004). Let alone how much this argument tells the truth, it is worthwhile to scrutinize the barriers to entry, if any, in the residential broadband market. Although the barriers to entry analysis has been regarded as a useful tool to look at the signal of market power in an industry, a review of the literature reveals that little research has been conducted in this area. Unfortunately, even economists have not agreed to one coherent definition and one analytic framework for PAGE 34 j info j VOL. 11 NO. 1 2009, pp. 34-51, Q Emerald Group Publishing Limited, ISSN 1463-6697 DOI 10.1108/14636690910932984 Eun-A Park is based at the University of New Haven, West Haven, Connecticut, USA Received 25 March 2008 Accepted 24 October 2008 The extension of this paper was presented at the Telecommunications Policy Research Conference 2006 held in Washington, D.C.