Telecommunications Bypass and the "Brandon Effect"

The creation of a charge for long distance companies to access the local telephone companies' switched network created the incentive to bypass the local switched network in order to avoid access charges that were substantially above cost. This paper explores the implications of a federal regulatory policy of a target total dollar switched access revenue requirement. In particular, the paper focuses on the so called "Brandon Effect" in which bypass incentives are attenuated when there is a target total dollar switched access revenue. Empirical analysis confirms the "Brandon Effect" on bypass decisions.