IDEAS home Printed from https://ideas.repec.org/p/sip/dpaper/05-006.html
   My bibliography  Save this paper

The Impact of "Deregulation" on Regulator Behavior: An Empirical Analysis of the Telecommunications Act of 1996

Author

Listed:
  • Gregory L. Rosston

    (Stanford Institute for Economic Policy Research)

  • Scott J. Savage

    (Department of Economics, University of Colorado)

  • Bradley S. Wimmer

    (Department of Economics, University of Nevada, Las Vegas)

Abstract

This paper examines how regulators set local prices in response to the changes brought on by the Telecommunications Act of 1996 (“Telecom Act”). We are particularly interested in the extent to which state regulators set prices that promoted efficiency or were influenced by private-interest groups who had secured rents under a regime of regulated monopoly. Using regional Bell operating company (RBOC) data, our empirical results indicate that private interests continue to influence the structure of retail and wholesale prices, although their influence appears to be waning. We find that changes to the regulatory structure, as measured by federal approval of RBOC Section 271 applications that open up markets to competition and universal service subsidies, resulted in a re-balancing of retail prices and lower overall price levels.

Suggested Citation

  • Gregory L. Rosston & Scott J. Savage & Bradley S. Wimmer, 2006. "The Impact of "Deregulation" on Regulator Behavior: An Empirical Analysis of the Telecommunications Act of 1996," Discussion Papers 05-006, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:05-006
    as

    Download full text from publisher

    File URL: http://www-siepr.stanford.edu/repec/sip/05-006.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Maher, Maria E., 1999. "Access costs and entry in the local telecommunications network: a case for de-averaged rates," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 593-609, May.
    2. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003. "Instrumental variables and GMM: Estimation and testing," Stata Journal, StataCorp LP, vol. 3(1), pages 1-31, March.
    3. Daniel Ackerberg & Michael Riordan & Gregory Rosston & Bradley Wimmer, 2008. "Low-Income Demand for Local Telephone Service: Effects of Lifeline and Linkup," Discussion Papers 07-032, Stanford Institute for Economic Policy Research.
    4. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    5. Abel, Jaison R, 2002. "Entry into Regulated Monopoly Markets: The Development of a Competitive Fringe in the Local Telephone Industry," Journal of Law and Economics, University of Chicago Press, vol. 45(2), pages 289-316, October.
    6. Christopher R. Knittel, 2004. "Regulatory Restructuring and Incumbent Price Dynamics: The Case of U.S. Local Telephone Markets," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 614-625, May.
    7. Kaserman, David L & Mayo, John W & Flynn, Joseph E, 1990. "Cross-Subsidization in Telecommunications: Beyond the Universal Service Fairy Tale," Journal of Regulatory Economics, Springer, vol. 2(3), pages 231-249, September.
    8. Randall S. Kroszner & Philip E. Strahan, 1999. "What Drives Deregulation? Economics and Politics of the Relaxation of Bank Branching Restrictions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1437-1467.
    9. Eriksson, Ross C & Kaserman, David L & Mayo, John W, 1998. "Targeted and Untargeted Subsidy Schemes: Evidence from Postdivestiture Efforts to Promote Universal Telephone Service," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 477-502, October.
    10. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    11. Gifford Raymond L., 2003. "Regulatory Impressionism: What Regulators Can and Cannot Do," Review of Network Economics, De Gruyter, vol. 2(4), pages 1-14, December.
    12. John Shea, 1997. "Instrument Relevance in Multivariate Linear Models: A Simple Measure," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 348-352, May.
    13. Smart, Susan R, 1994. "The Consequences of Appointment Methods and Party Control for Telecommunications Pricing," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(2), pages 301-323, Summer.
    14. Austan Goolsbee & Jonathan Guryan, 2006. "The Impact of Internet Subsidies in Public Schools," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 336-347, May.
    15. Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 131-150, June.
    16. Susan R. Smart, 1994. "The Consequences of Appointment Methods and Party Control for Telecommunications Pricing," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(2), pages 301-323, June.
    17. Karen Palmer, 1992. "A Test for Cross Subsidies in Local Telephone Rates: Do Business Customers Subsidize Residential Customers?," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 415-431, Autumn.
    18. Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, vol. 60(3), pages 265-283, June.
    19. Friedrich Heinemann & Martin Schüler, 2004. "A Stiglerian View on Banking Supervision," Public Choice, Springer, vol. 121(1), pages 99-130, October.
    20. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(3), pages 371-400.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gregory L. Rosston & Scott J. Savage & Bradley S. Wimmer, 2008. "The Effect of Private Interests on Regulated Retail and Wholesale Prices," Journal of Law and Economics, University of Chicago Press, vol. 51(3), pages 479-501, August.
    2. Gregory L. Rosston & Scott J. Savage & Bradley S. Wimmer, 2013. "Effect of Network Unbundling on Retail Prices: Evidence from the Telecommunications Act of 1996," Journal of Law and Economics, University of Chicago Press, vol. 56(2), pages 487-519.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gregory L. Rosston & Scott J. Savage & Bradley S. Wimmer, 2008. "The Effect of Private Interests on Regulated Retail and Wholesale Prices," Journal of Law and Economics, University of Chicago Press, vol. 51(3), pages 479-501, August.
    2. Pérez Montes, Carlos, 2013. "Regulatory bias in the price structure of local telephone service," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 462-476.
    3. Carlos Perez Montes, 2012. "Regulatory bias in the price structure of local telephone services," Working Papers 1201, Banco de España.
    4. Asadul Islam & Dietrich K. Fausten, 2008. "Skilled Immigration and Wages in Australia," The Economic Record, The Economic Society of Australia, vol. 84(s1), pages 66-82, September.
    5. Martin Strieborny & Madina Kukenova, 2016. "Investment in Relationship-Specific Assets: Does Finance Matter?," Review of Finance, European Finance Association, vol. 20(4), pages 1487-1515.
    6. Rui HAO & Zheng WEI, 2009. "Sources Of Income Differences Across Chinese Provinces During The Reform Period: A Development Accounting Exercise," The Developing Economies, Institute of Developing Economies, vol. 47(1), pages 1-29, March.
    7. Rui Hao, 2011. "Sources of income differences across Chinese provinces during the reform period: a development accounting exercise," CERDI Working papers halshs-00557001, HAL.
    8. Duso, Tomaso & Seldeslachts, Jo, 2010. "The political economy of mobile telecommunications liberalization: Evidence from the OECD countries," Journal of Comparative Economics, Elsevier, vol. 38(2), pages 199-216, June.
    9. Prabir C. Bhattacharya, 2004. "Economic Development, Gender Inequality and Demographic Outcomes: Evidence from India," Working Papers E01, Department of Economics, School of Management and Languages, Heriot Watt University.
    10. Zenetti, German & Klapper, Daniel, 2016. "Advertising Effects Under Consumer Heterogeneity – The Moderating Role of Brand Experience, Advertising Recall and Attitude," Journal of Retailing, Elsevier, vol. 92(3), pages 352-372.
    11. Doko Tchatoka, Firmin Sabro, 2012. "Specification Tests with Weak and Invalid Instruments," MPRA Paper 40185, University Library of Munich, Germany.
    12. Ackerberg, Daniel A. & DeRemer, David R. & Riordan, Michael H. & Rosston, Gregory L. & Wimmer, Bradley S., 2014. "Estimating the impact of low-income universal service programs," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 84-98.
    13. Guilhem Bascle, 2008. "Controlling for endogeneity with instrumental variables in strategic management research," Post-Print hal-00576795, HAL.
    14. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003. "Instrumental variables and GMM: Estimation and testing," Stata Journal, StataCorp LP, vol. 3(1), pages 1-31, March.
    15. Soo, Kwok Tong & Elliott, Caroline, 2010. "Does price matter? Overseas students in UK higher education," Economics of Education Review, Elsevier, vol. 29(4), pages 553-565, August.
    16. Antonio Ruiz Porras, 2016. "La investigación econométrica mediante paneles de datos:historia, modelos y usos en México," Archivos Revista Economía y Política., Facultad de Ciencias Económicas y Administrativas, Universidad de Cuenca., vol. 24, pages 11-32, Julio.
    17. Mark L. Burton & David L. Kaserman & John W. Mayo, 2009. "Common Costs And Cross‐Subsidies: Misestimation Versus Misallocation," Contemporary Economic Policy, Western Economic Association International, vol. 27(2), pages 193-199, April.
    18. Zaid BAKHT & Tatsufumi YAMAGATA & Mohammad YUNUS, 2009. "Profitability And Diversity Among Knitwear‐Producing Firms In Bangladesh: The Prospects Of A Labor‐Intensive Industry In A Least Developed Country," The Developing Economies, Institute of Developing Economies, vol. 47(3), pages 340-366, September.
    19. Bertoldi, Paolo & Mosconi, Rocco, 2020. "Do energy efficiency policies save energy? A new approach based on energy policy indicators (in the EU Member States)," Energy Policy, Elsevier, vol. 139(C).
    20. Osvaldo Lagares, 2016. "Capital, Economic Growth and Relative Income Differences in Latin America," Discussion Papers 16/03, Department of Economics, University of York.

    More about this item

    Keywords

    competition; political contributions; private interest; public interest; regulation; telecommunications; universal service;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sip:dpaper:05-006. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anne Shor (email available below). General contact details of provider: https://edirc.repec.org/data/cestaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.