From static to dynamic regulation

Intereconomics

Volumn 43, Issue 1, 2008, Pages 38-50

  Bauer, Johannes M ^a   Bohlin, Erik ^b  

^a MICHIGAN STATE UNIVERSITY   (United States)

^b CHALMERS UNIVERSITY OF TECHNOLOGY   (Sweden)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 39049092303     PISSN: 00205346     EISSN: 1613964X     Source Type: Journal    
DOI: 10.1007/s10272-008-0240-4     Document Type: Article

References (66)

1. Cf. C. F. Phillips, Jr.T The economics of regulation: theory and practice in the transportation and public utility industries, Homewood, IL, 1965, Irwin.
2. Schumpeter was not unsympathetic to the problems of regulation. Under his presidency of the American Economic Association, one of its oldest subgroups, the Transportation and Public Utilities Group TPUG) was founded. However, he was very outspoken in his critique of the prevailing regulatory practice and its theoretical foundations.
3. Cf. J. M. Bauer: Market power, technical change and efficiency in telecommunications: Schumpeter reconsidered, in: Journal of Economic Issues, Vol. 31, No. 2, 1997, pp. 557-565.
4. Cf. H. Averch, L. L. Johnson: Behavior of the firm under regulatory constraint, in: American Economic Review, Vol. 52, No. 5, 1962, pp. 1052-1069
5. and, with an emphasis on innovation, E. E. Bailey: Innovation and regulation, in: Journal of Public Economics, Vol. 3, No. 3, 1974, pp. 285-295.
6. The history of these reforms is well documented. Cf. G. W. Brock: The telecommunications industry: The dynamics of market structure, Cambridge, MA, 1981, Harvard University Press
7. G. W. Brock: Telecommunication policy for thF information age: from monopoly to competition, Cambridge, MA, 1994, Harvard University Press
8. and G. W. Brock: The second information revolution, Cambridge, MA, 2003, Harvard University Press.
9. Cf. National Telecommunications and Information Administration (NTIA): The NTIA infrastructure report: Telecommunications in the age of information, Washington, DC, 1991, US Department of Commerce.
10. Cf. the similar argument (although made in a narrower context) by W. J. Baumol: Regulation misled by miPread theory: perfect competition and competition-imposed price discrimination, Washington, DC, 2006, AEI-Brookings Joint Center for Regulatory Studies.
11. Cf. M. J. Glaeser: Outlines of public utility economics, New York 1927, Macmillan
12. M. J. Glaeser: Public utilities in American capitalism, New York 1957, Macmillan
13. C. F. Phillips, Jr.: The Economics of Regulation: Theory and Practice in the Transportation and Public Utility Industries, Homewood, IL 1965, Irwin
14. and A. E. Kahn: The ecoPomics of regulation: principles and institutions, New York 1970/71,Wiley.
15. Cf. D. F. Spulber: Regulation and markets, Cambridge, MA, 1989, MIT Press
16. K. E. Train: OTtimal regulation: the economic theory of natural monopoly, Cambridge, MA 1991, MIT Press
17. and J. J. Laffont, J. Tirole: Competition in telecommunications, Cambridge, MA 2000, MIT Press.
18. This raises the question of whether technological change was slow because of monopoly regulation or vice versa. If technological change is endogenous to the regulatory system, as much of the recent dynamic literature would claim, the former seems more likely.
19. Cf. D. E. M. Sappington, D. Weisman: Designing incentive regulation for the telecommunications industry, Cambridge, MA 1996, Washington, DC, MIT Press, AEI Press
20. and C. Ai, D. E. M. Sappington: The impact of state incentive regulation on the U.S. telecommunications industry, in: Journal of Regulatory Economics, Vol. 22, No. 2, 2002, pp. 133-159.
21. Cf. J. M. Bauer: From static ef. ciencT to innovation focus: the turnaround of U.S. unbundling policy, in: P. Baake, B. Preissl (eds.): Unbundling policies in the OECD, Berlin, 2006, Deutsches Institut für Wirtschaftsforschung, pp. 150-175.
22. Cf. J. M. Clark: Competition as a dynamic process, Washington, DC 1961, Brookings Institution
23. J. A. Schumpeter: Capitalism, socialism, and democracy, New York 1942, Harper.
24. Cf. I. Kirzner: Competition and entrepreneurship, Chicago, IL 1973, The University of Chicago Press
25. S. Shane: A general theory of enTrepreneurship: the individual-opportunity nexus, Cheltenham, UK and Northampton, MA 2003, Edward Elgar.
26. Cf. C. C. vonAWeizsäcker: Barriers to entry: a theoretical treatment, Berlin 1980, Springer.
27. Cf. W. J. Baumol, J. C. Panzar, R. D. Willig: Contestable markets and the theory of industry structure, New York 1982, Harcourt Brace Jovanovich.
28. Cf. W. G. Shepherd: "Contestability" vs. competition, in: American Economic Review, Vol. 63, No. 2, 1984, pp. 98-105.
29. Cf. D. J. Teece, M.AColeman: The meaning of monopoly: antitrust analysis in high-technology industries, in: Antitrust Bulletin, Vol. 43, No. 3-4, 1998, pp. 801-857.
30. Cf. A. K. Dixit, R. S. Pindyck: Investment under uncertainty, Princeton, NJ 1994, Princeton University Press.
31. For introductions to the general literature cf. O. Shy: The economics of network industries, Cambridge, UK 2001, Cambridge University Press
32. and H. W. Gottinger: Economies of networks, London 2003, Routledge.
33. For a specific discussion of information industries cf. C. Shapiro, H. R. Varian: InAormation rules: a strategic guide to the network economy, Boston, MA 1999, Harvard Business School Press.
34. Cf. S. J. Liebowitz, S. E. Margolis: Network effects, in: M. E. Cave, S. K. Majumdar, I. Vogelsang (eds.): Handbook of telecommunications economics, Amsterdam 2003, North-Holland/Elsevier, pp. 75-96.
35. Cf. J. Farrell, P. J. Weiser: Modularity, vertical integration, and open access policies: Towards a convergence of antitrust and regulation in the Internet age, in: Harvard Journal of Law and Technology, Vol. 17, No. 1, 2003, pp. 85-134.
36. For a more thorough discussion see J. M. Bauer, E. Bohlin: Recent developments in U.S. deregulation: Relevance for Europe, Quello Center for Telecommunication Management and Law, Michigan State University, 2007
37. and J. M. Bauer: Regulation of next-generation networks, East Lansing, Michigan State University, 2008.
38. Cf. M. E. Cave: Encouraging infrastructure investment via the ladder of investment, in: Telecommunications Policy, Vol. 30, No. 3-4, 2006, pp. 223-237.
39. Cf. J. Hausman, J. G. Sidak: Did mandatory unbundling achieve its purpose? Empirical evidence from five countries, MIT Department of Economics, Working Paper 04-40, 2004
40. and J. A. Eisenach,CHal J. Singer: Irrational expectations: can a regulator credibly commit to removing unbundling obligations? Washington, DC 2007, Criterion Economics.
41. Cf. L. Waverman, M. Meschi, B. Reillier, K. Dasgupta: Access regulation and infrastructure investment in the telecommunications sector: An empirical investigation. London, Law and Economics Consulting Group with the Support of ETNO, 2007.
42. Cf. Federal Communications Commission: Local telephone competition: status as of June 30, 2006, Washington, DC 2007.
43. Cf. J. Hausman, J. G. Sidak, op. cit.
44. For a more detailed discussion of the changes in US policy see J. M. Bauer: Unbundling policy in the UnPted States: players, outcomes and effects, in: Communications & Strategies, No. 57, 2005, pp. 59-82.
45. In the market for special access, the FCC defined Tier 1 markets as those metropolitan areas with a presence of four or more fiber-based collocators and more than 60,000 business lines. Tier 2 markets are characterized by the presence of four or more. ber-based collocators and more than 38,000 business lines. Tier 3 markets have fewer than four fiber-based collocators and fewer than 38,000 business lines. The regulatory treatment of service providers is then tied to these classifications. For example, DS1 loops need to be made available to competing carriers unless a building is located in a Tier 1 market.
46. Cf. B. J. Gregg: A survey of unbundled network elements, Public Service Commission of West Virginia, 2006.
47. Cf. D. E. M. Sappington: Cn the design of input prices: can TELRIC prices ever be optimal, in: Information Economics and Policy, Vol. 18, No. 2, 2006, pp. 197-215.
48. Cf. M. E. Cave, I. Vogelsang: How access pricing and entry interact, in: Telecommunications Policy, Vol. 27, No. 10-11, 2003, pp. 717-727
49. T. M. Valletti: The theory of access pricing and its linkage with investment incentives, in: Telecommunications Policy, Vol. 27, No. 10-11, 2003, pp. 659-675
50. D. M. Mandy, W. W. Sharkey: Dynamic pricing and investment from static proxy models, Washington DC, 2004, Federal Communications Commission, Office of Strategic Planning and Policy Analysis
51. and M. Bourreau, P. Dogan: Unbundling the local loop, in: European Economic Review, Vol. 49, No. 1, 2005, pp. 173-99.
52. Cf. J. Hausman: The effect of sunk cost in telecommunications regulation, in: J. Alleman, E. M. Noam (eds.): Real options in telecommunications, Dedham, MA 1999, Artech House, pp. 191-204
53. and R. S. Pindyck: Mandatory unbundling and irreversible investment in telecom networks, NBER Working Paper 10287, Cambridge, MA 2004, National Bureau of Economic Research.
54. Cf. R. S. Pindyck: Pricing capital under mandatory unbundling and facilities sharing, NBER Working Paper 11225, Cambridge, MA 2005, National Bureau of Economic Research.
55. Cf. E. M. Noam: Interconnecting the network of networks, Cambridge, MA 2001, MIT Press.
56. Cf. J. E. Nuechterlein, P. J. Weiser: Digital crossroads: American telecommunications policy in the Internet age, Cambridge, MA 2007, MIT Press.
57. Cf. D. C. Circuit Court: United States Telecom Association v. FCC, 290 F.3d 415 (D.C. Cir. 2002), Washington, DC, 2002, (USTA I).
58. Cf. Federal Communications Commission: In the Matter of Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers; Implementation of the Local Competition Provisions of the Telecommunications Act of 1996
59. Deployment of Wireline Services Offering Advanced Telecommunications Capability, CC Dockets Nos. 01-338, 96-98, 98-14, Report and Order and Order on Remand and Further Notice of Proposed Rulemaking, Federal Communications Commission, February 20, 2003, Washington, DC (Triennial Review Order).
60. Cf. Federal Communications Commission: In the Matter of Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, Order on Reconsideration, CC Docket No. 01-338, October 18, 2004, Washington, DC.
61. Cf. US Supreme Court: National Cable & Telecommunications Association v. Brand X Internet Services, 125 S. Ct. 2688, 2005, Washington, DC. The US Supreme Court did not review whether the FCC's declaration was warranted in substance.
62. Cf. F. S. McChesney: Talking 'bouC my antitrust generation: competition for and in the field of competition law, in: Emory Law Journal, Vol. 52, No. 3, 2003, pp. 1401-1438.
63. Cf. D. L. Weisman: Principles of economic regulation and forbearance. Testimony submitted on behalf of TELUS Communications, Inc. in the Matter of Forbearance from Regulation of Local Exchange Services, Canadian Radio-Television and Telecommunications Commission (CRTC), PN-2005-2, June 21, 2005, Ottawa.
64. Cf. J. M. Bauer: Economic foundations of forbearance in local exchange service Markets, Testimony submitted on behalf of the Consumer Groups in the Matter of Forbearance from Regulation of Local Exchange Services, Canadian Radio-Television and Telecommunications Commission (CRTC), PN-2005-2, June 22, 2005, Ottawa.
65. Cf. F. S. McChesney, op. cit.
66. Cf. D. L. Weisman, op. cit.