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Explaining the Choice Among Regulatory Plans in the U.S. Telecommunications Industry

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  • Stephen G. Donald

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  • David E.M. Sappington

Abstract

We investigate why different states in the United States choose different regulatory plans in their telecommunications industry. We present a simple theoretical model and an empirical analysis of the issue. We find that a state is more likely to replace rate-of-return regulation with incentive regulation when: (1) residential basic local service rates have historically been relatively high; (2) allowed earnings under rate-of-return regulation in the state have been either particularly high or particularly low; (3) the state's leaders tend to come from both major political parties, rather than from a single party; (4) the state's urban population is growing relatively rapidly; and (5) the bypass activity of competitors in the state is less pronounced. Copyright 1995 by MIT Press.
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Suggested Citation

  • Stephen G. Donald & David E.M. Sappington, 1995. "Explaining the Choice Among Regulatory Plans in the U.S. Telecommunications Industry," Papers 0055, Boston University - Industry Studies Programme.
  • Handle: RePEc:fth:bostin:0055
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    Cited by:

    1. Gual Jordi & Trillas Francesc, 2006. "Telecommunications Policies: Measurement and Determinants," Review of Network Economics, De Gruyter, vol. 5(2), pages 1-24, June.
    2. Dewenter, Ralf & Kruse, Jörn, 2011. "Calling party pays or receiving party pays? The diffusion of mobile telephony with endogenous regulation," Information Economics and Policy, Elsevier, vol. 23(1), pages 107-117, March.
    3. Larry Blank & John Mayo, 2009. "Endogenous Regulatory Constraints and the Emergence of Hybrid Regulation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(3), pages 233-255, November.
    4. Wimmer, Bradley S. & Rosston, Gregory L., 2005. "Local telephone rate structures: before and after the Act," Information Economics and Policy, Elsevier, vol. 17(1), pages 13-34, January.
    5. Toivanen, Otto, 2004. "Choosing Standards," Discussion Papers 937, The Research Institute of the Finnish Economy.
    6. Weisman, Dennis L., 2002. "Is there 'Hope' for price cap regulation?," Information Economics and Policy, Elsevier, vol. 14(3), pages 349-370, September.
    7. 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.
    8. Jaison Abel & Michael Clements, 2001. "Entry under Asymmetric Regulation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 19(2), pages 227-242, September.
    9. 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.
    10. 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.
    11. 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.

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