Lowering Prices with Tougher Regulation: Forward-Looking Costs, Depreciation, and the Telecommunications Act of 1996

Abstract

The preamble to the Telecommunications Act of 1996² (henceforth, “the Act”) states that Congress’ objective in passing it was “[t]o promote competition and reduce regulation in order to secure lower prices … for American telecommunications consumers.” Several features of this objective should be noted. First, the ultimate objective is to lower prices. Second, the mechanism that is supposed to lower prices is competition, not regulation. Indeed, easing regulation is an explicitly -stated objective. Of course, a major issue in the implementation of the Act is the sequencing of the development of competition and the easing of regulation; and it is reasonable to suppose that Congress intended most of the easing of regulation to come at some point in the future. Still, nowhere does the Act say that the intent is to lower prices by tightening regulation.

I have benefited from comments by Ingo Vogelsang, William Moore, and Christopher Babb.