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The Impact of Alternative Forms of State Regulation of AT&T on Direct-Dial, Long-Distance Telephone Rates

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  • Alan D. Mathios
  • Robert P. Rogers

Abstract

Federal and state regulatory agencies have traditionally used rate-of-return regulation to set profit and rate levels for utilities. A "price cap" framework, in which the regulatory agency sets a maximum rate below which the regulated utility has pricing flexibility, is possibly a more efficient alternative to rate-of-return regulation. This article presents an econometric analysis that compares AT&T's prices of intrastate, long-distance telephone service in states that allow AT&T pricing flexibility with those in states that do not. The results of this analysis suggest that AT&T's daytime, evening, nighttime, and weekend rates are significantly lower in states that allow pricing flexibility than in states that use rate-of-return regulation.

Suggested Citation

  • Alan D. Mathios & Robert P. Rogers, 1989. "The Impact of Alternative Forms of State Regulation of AT&T on Direct-Dial, Long-Distance Telephone Rates," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 437-453, Autumn.
    • Handle: RePEc:rje:randje:v:20:y:1989:i:autumn:p:437-453
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    Cited by:

    1. Philippe Gagnepain & Marc Ivaldi, 2002. "Incentive Regulatory Policies: The Case of Public Transit Systems in France," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 605-629, Winter.
    2. Newbery, David M., 1997. "Privatisation and liberalisation of network utilities," European Economic Review, Elsevier, vol. 41(3-5), pages 357-383, April.
    3. Philippe Gagnepain, 1998. "Structures productives de l'industrie du transport urbain et effets des schémas réglementaires," Économie et Prévision, Programme National Persée, vol. 135(4), pages 95-107.
    4. Marija Bartl, 2010. "The Affordability of Energy: How Much Protection for the Vulnerable Consumers?," Journal of Consumer Policy, Springer, vol. 33(3), pages 225-245, September.
    5. Tomaso Duso, 2005. "Lobbying and regulation in a political economy: Evidence from the U.S. cellular industry," Public Choice, Springer, vol. 122(3), pages 251-276, March.
    6. Resende, Marcelo, 1999. "Productivity growth and regulation in U.S. local telephony," Information Economics and Policy, Elsevier, vol. 11(1), pages 23-44, March.
    7. Mattos, César & Coutinho, Paulo, 2004. "The Duopoly Policy in the Brazilian Model of Telecommunications Reform," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 58(3), July.
    8. Vladimir Hlasny, 2008. "The impact of restructuring and deregulation on gas rates," Journal of Regulatory Economics, Springer, vol. 34(1), pages 27-52, August.
    9. Donald, Stephen G & Sappington, David E M, 1995. "Explaining the Choice among Regulatory Plans in the U.S. Telecommunications Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 237-265, Summer.
    10. Philippe Gagnepain, 2001. "La nouvelle théorie de la régulation des monopoles naturels : fondements et tests," Post-Print hal-00622947, HAL.
    11. Yu Hsing, 1995. "Impacts of deregulation and price caps on rate convergence between Washington, DC and eight major cities: A pooled data model," Information Economics and Policy, Elsevier, vol. 7(2), pages 135-145, June.
    12. Committee, Nobel Prize, 2014. "Market power and regulation (scientific background)," Nobel Prize in Economics documents 2014-2, Nobel Prize Committee.
    13. Robert W. Crandall, 1991. "LIBERALIZATION WITHOUT DEREGULATION: U.S. TELECOMMUNICATIONS POLICY DURING THE 1980s," Contemporary Economic Policy, Western Economic Association International, vol. 9(4), pages 70-81, October.
    14. Robert Hahn & Robert Metcalfe & Florian Rundhammer, 2020. "Promoting customer engagement: A new trend in utility regulation," Regulation & Governance, John Wiley & Sons, vol. 14(1), pages 121-149, January.
    15. Krouse, Clement G & Park, Jongsur, 2003. "Competition in the Interexchange Telecommunication Market," Journal of Law and Economics, University of Chicago Press, vol. 46(1), pages 85-101, April.
    16. John E. Kwoka, 1993. "Implementing price cops in telecommunications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(4), pages 726-752.
    17. Dag Dalen & Andres Gómez-Lobo, 2003. "Yardsticks on the road: Regulatory contracts and cost efficiency in the Norwegian bus industry," Transportation, Springer, vol. 30(4), pages 371-386, November.
    18. Simran Kahai & David Kaserman, 2007. "Effective regulation versus tacit collusion in the long-distance market: an empirical analysis," Journal of Regulatory Economics, Springer, vol. 32(3), pages 247-257, December.
    19. Zimmerman, Paul R. & Flaherty, Susan M.V., 2007. "Location monopolies and prison phone rates," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(2), pages 261-278, May.
    20. Knittel, Christopher R., 1997. "Local telephone pricing: competitive forces at work," Utilities Policy, Elsevier, vol. 6(2), pages 87-96, June.
    21. Dalen, Dag Morten & Gomez-Lobo, Andres, 1997. "Estimating cost functions in regulated industries characterized by asymmetric information," European Economic Review, Elsevier, vol. 41(3-5), pages 935-942, April.

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