Choosing among Regulatory Options in the United States Telecommunications Industry

Stephen Donald and David Sappington

Journal of Regulatory Economics, 1997, vol. 12, issue 3, 227-43

Abstract: We examine the determinants of the choice between rate-of-return regulation and incentive regulation in the United States telecommunications industry. We find that a state is more likely to select incentive regulation in any year: (1) when it has employed incentive regulation in the past; (2) when the Republican party controls both the executive and the legislative branches of the state governments, but the Democratic party has controlled these branches historically, and (3) as the firm's earnings under rate-of-return regulation increase toward the industry average. We also find that appointed regulators are more likely than their elected counterparts to revert to rate-of-return regulation. Copyright 1997 by Kluwer Academic Publishers

Date: 1997
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