American Economic Review: Vol. 102 No. 3 (May 2012)


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Telecommunications Deregulation

Article Citation

Hausman, Jerry A., and William E. Taylor. 2012. "Telecommunications Deregulation." American Economic Review, 102(3): 386-90.

DOI: 10.1257/aer.102.3.386


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.

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Hausman, Jerry A. (MIT)
Taylor, William E. (NERA, Boston, MA)

JEL Classifications

L96: Telecommunications
L98: Industry Studies: Utilities and Transportation: Government Policy
L51: Economics of Regulation

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