The economic theory of regulation and the US telecoms industry

John T. Wenders

Telecommunications Policy, 1988, vol. 12, issue 1, 16-26

Abstract: The usual outcome of the economic theory of regulation is that regulatory processes will be dominated by the few who have much to gain, at the expense of the many who will lose. This paper argues that this is not the outcome of political-regulatory choice in the US telecommunications industry. Regulatory authorities were here able to administer a toll-to-residence subscriber subsidy mechanism. This resulted in the AT&T divestiture and the FCC's efforts to end these subsidy flows. Unless the politically popular subsidy scheme is ended, competition is likely to produce a bifurcated US telecommunications network with most of the large users either bypassing the local network or migrating to discounted toll offerings.

Date: 1988
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