Paul MacAvoy asked, What is the escape from the situation in which industry growth is held back by the lack of competitive entry brought about by regulatory agencies ostensibly acting in the name of protecting consumers? In this article, we examine MacAvoy's prescient critiques of the failure of antitrust and regulation to produce competitive markets for telecommunications services. We explain how the real competition has come from new products and innovation. Market power in the short run is the incentive that drives investment in research and development, and, in telecommunications, it is a small price to pay for innovative new services. Unfortunately, the experience in telecommunications has been one of regulatory delay of implementing new services and technology to level some hypothetical playing field rather than rewarding innovation with a temporary market advantage. We suggest that technical change enhanced by benign regulatory neglect is the answer to MacAvoy's question. It is the escape from counterproductive regulation to control market power in telecommunications.

Alfred E. Kahn was an observer and practitioner of telecommunications regulation as technology changed the industry from a natural monopoly to a platform-based oligopoly among telephone, cable, satellite, and wireless carriers. Regulation and legislation were slow to recognize these changes, and large welfare losses occurred, some of which could have been avoided if regulators, legislators and economists had followed Fred’s economic advice: Prices must be informed by costs; the relevant costs are actual incremental costs; costs and prices are an outcome of a Schumpeterian competitive process, not the starting point; excluding firms from markets is fundamentally anticompetitive; a reliance on imperfect markets subject to antitrust law is preferable to necessarily imperfect regulation; and a regulatory transition to deregulation entails propensities to micromanage the process to generate preferred outcomes, visible competitors, and expedient price reductions.

From Fred Kahn's writings and experiences as a telecommunications regulator and commenter, we draw the following conclusions: prices must be informed by costs; costs are actual incremental costs; costs and prices are an outcome of a Schumpeterian competitive process, not the starting point; excluding incumbents from markets is fundamentally anticompetitive; and a regulatory transition to deregulation entails propensities to micromanage the process to generate preferred outcomes, visible competitors and expedient price reductions. And most important, where effective competition takes place among platforms characterized by sunk investment—land-line telephony, cable and wireless —traditional regulation is unnecessary and likely to be anticompetitive.

In the authors' shared opinion, the economic evidence does not support the regulations proposed in the Commission’s Notice of Proposed Rulemaking Regarding Preserving the Open Internet and Broadband Industry Practices (the “NPRM”). To the contrary, the economic evidence provides no support for the existence of market failure sufficient to warrant ex ante regulation of the type proposed by the Commission, and strongly suggests that the regulations, if adopted, would reduce consumer welfare in both the short and long run. To the extent the types of conduct addressed in the NPRM may, in isolated circumstances, have the potential to harm competition or consumers, the Commission and other regulatory bodies have the ability to deter or prohibit such conduct on a case-by-case basis, through the application of existing doctrines and procedures. Hence, the approach advocated in the NPRM is not necessary to achieve whatever economic benefits may be associated with prohibiting harmful discrimination on the Internet.

After decades of liberalization of the telecommunications industry around the world and technological convergence that allows for increasing competition, sector-specific regulation of telecommunications has been on the decline. As a result, the telecommunications industry stands in the middle of a debate that calls for either a total deregulation of access to broadband infrastructures or a separation of infrastructure from service delivery. This book proposes new approaches to dealing with the current and future issues of regulation of telecommunication markets on both a regional and a global scale.

Since the 1990s, local exchange telecommunications carriers (LECs) have been subject to incentive regulation plans. This paper discusses theoretical and practical aspects of the evolution of price regulation as retail competition increases and as regulators mandate extensive availability of wholesale services. Particular issues include (1) adjusting price change/productivity expectations as the proportion of services subject to price regulation decreases, (2) whether earnings sharing is compatible with more limited price regulation, and (3) compatibility among wholesale and retail price and quality regulation. The paper concludes by describing recent developments in specific jurisdictions and recommends directions for future incentive regulation.

Fifteen scholars on auctions and telecommunications regulation urge the FCC to cancel bids made in, or permit winning bidders to opt out of, the reauction of the NextWave licenses in Auction 35. For auctions to function efficiently, buyers and sellers must follow basic rules, including the rule that a seller deliver in a timely manner what the winning bidder has purchased. This rule has not been applied in Auction 35. The FCC auctioned something that it did not have - immediate access to the spectrum for the winning bidders. Thus, if the FCC forces the winning bidders to pay, they will sue the agency for forcing them to pay for something that they did not receive. Alternatively, their shareholders will sue the companies. Meanwhile, wireless carriers have invested in less efficient technologies to meet capacity needs. The FCC has said that its current policy toward Auction 35 seeks to "protect the integrity" of the spectrum auction process. The opposite is already occurring. The FCC increases uncertainty in the wireless market if it holds carriers accountable for winning bids for licenses that the agency cannot deliver. Bidders will discount their future bids accordingly, and auction revenues will fall. That outcome does not benefit consumers, taxpayers, workers, or shareholders.

This paper discusses the welfare effects of entry by a vertically integrated access and long-distance service provider into the long-distance market. Using a stylized model of these markets, we conclude that substantial net consumer benefits arise when a vertically integrated firm is created by the entry of a LEC into the long-distance market, and these gains are mostly achieved from declines in supra-competitive profits received by long-distance incumbents. We find that these gains dominate losses in producer surplus that could arise even if integrated firm entry were to displace more efficient long-distance providers.

In this paper, we examine seven indicia of the effect of regulated competition in long-distance telecommunications. The evidence we have examined suggests that regulation or the threat of antitrust intervention are the major factors which constrain AT & T's prices to small customers. We conclude that small customers have yet to enjoy the full benefits of competition in long distance.

Price-cap regulation (PCR) for the telephone industry is a relatively recent phenomenon. In the United States, PCR has been replacing traditional cost-based regulation since the Federal Communications Commission (FCC) adopted a price-cap plan for AT&T beginning in 1989. price-cap plans for local exchange carriers (LECs) began shortly thereafter in the federal jurisdiction and in some states. At the present time approximately 30 states have some form of price-cap plan.1

Gabel and Kennet resurrect three familiar arguments in support of their view that there would be no clear welfare gain from raising the price of exchange service: (i) access costs vary with usage, (ii) access is a joint input that would not be recovered through a fixed charge if markets were competitive, and (iii) new technology has increased the incremental cost of access, and services that require the new technology should bear the increased costs.28 By my scorecard, the first round is a tie, and the last two go to Kahn and Shew.

The implications of finite sample distribution theory for applied econometrics are explored. In general, its relevance is limited by three considerations: (i) sampling errors are of secondary importance in practice, (ii) exact and approximate results depend on the unknown structural parameters of the problem, and (iii) results more accurate than the limiting distribution require further distributional assumptions about some unobservable. Despite these difficulties, some useful information simultaneous equations estimators are sketched. Keywords: Distribution TheoryAsymptotic Distribution TheoryEdgeworth ExpansionsEconometric Theory

Northern forest openings are variable in vegetative life form. Eighty species of nongame birds are associated with forest openings or edge of forest openings in Northern Michigan. Current management is reviewed and suggestions for additional management practices and studies are included.