Deregulation and Managed Competition in Network Industries

32 Pages Posted: 6 Nov 2001 Last revised: 2 Nov 2009

Abstract

The competitive transformation of telecommunications and other network industries in the United States has caused governmental policy makers to be increasingly concerned with the fairness of the deregulatory process. This Essay offers a set of concrete guidelines that regulators of network industries should follow in removing regulatory controls: To achieve the productive and allocative benefits of competition and to ensure that the transition from regulation to competition is accomplished fairly, regulators should observe the principles of economic incentive, equal opportunity, and impartiality. Economic incentives allow incumbent firms to maintain their quality of service and innovation and investment, and allow them to recover stranded costs for past, present, and future regulatory obligations. Regulators can ensure equal opportunity by ensuring that regulation falls evenly on both competitive entrants and incumbents. Impartiality in increasing competition can be achieved by regulators refraining from market interventions that favor particular competitors. Only by treating incumbents and entrants symmetrically and resisting the temptation to manage competition will the regulators ensure that the deregulatory process in network industries will yield all of the benefits of market competition.

JEL Classification: K0, K2, K21, K23, L4, L5, L51, L9, L96

Suggested Citation

Sidak, J. Gregory and Spulber, Daniel F., Deregulation and Managed Competition in Network Industries. Yale Journal on Regulation, Vol. 15, No. 1, pp. 117-147, Winter 1998. Available at SSRN: https://ssrn.com/abstract=289849 or http://dx.doi.org/10.2139/ssrn.289849

J. Gregory Sidak (Contact Author)

Criterion Economics, L.L.C. ( email )

1717 K Street, N.W.
Washington, DC 20006
United States
(202) 518-5121 (Phone)

HOME PAGE: http://www.criterioneconomics.com

Daniel F. Spulber

Northwestern University - Kellogg School of Management ( email )

606 Leverone Hall
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8675 (Phone)
847-467-1777 (Fax)

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