Review of Industrial Organization

, Volume 42, Issue 2, pp 203–230 | Cite as

Telecommunication in the US: From Regulation to Competition (Almost)



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.


Competition Deregulation Kahn Regulation Telecommunications 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Bajaj, V., & Maxon, T. (2005). Deal near for takeover of AT&T? Dallas Morning News, January 28. Web site:
  2. Baumol W., Sidak J. G. (1994) Toward competition in local telephony. MIT Press, CambridgeGoogle Scholar
  3. Blumberg, S., & Luke, J. (2012). Wireless substitution: Early release of estimates from the National Interview Health Survey, July–December 2011. Web site:
  4. Breyer, S. (1999). AT&T Corp. v. Iowa Utilities Board, 119 S. Ct. 721. Web site:
  5. Cave M. (2006) Encouraging infrastructure competition via the ladder of investment. Telecommunications Policy 30(3–4): 223–237CrossRefGoogle Scholar
  6. Clarke, R. (2006). Costs of neutral/unmanaged IP networks. Review of network economics, 8(1), Retrieved November 7, 2012, from
  7. Crandall R. W., Waverman L. (1995) Talk is cheap. The Brookings Institution, WashingtonGoogle Scholar
  8. Federal-State Joint Board on Universal Service. (2011). Monitoring report, CC Docket Nos. 98-02, 96-45.Google Scholar
  9. FCC. (1995). In the matter of price cap performance review for local exchange carriers, CC Docket No. 94-1, First report and order.Google Scholar
  10. FCC. (2007). RBOC applications to provide in-region, InterLATA Services Under § 271. In the matters of section 272(f)(1) sunset of the boc separate affiliate and related requirements (and others), WC Docket Nos. 02-112 and 06-120, CC Docket No. 00-175, report and order and memorandum opinion and order. Web site:
  11. FCC. (2009). Telecom industry revenues, 2009. Web site:
  12. FCC. (2010). In the matter of preserving the open internet, broadband industry practices, FCC GN Docket No. 09-191, WC Docket No. 07-52, Report and order, released December 23, 2010.Google Scholar
  13. FCC. (2011a). In the Matter of Jurisdictional Separations and Referral to the Federal-State Joint Board: Report and Order, CC Docket No. 80-286.Google Scholar
  14. FCC. (2011b). Local telephone competition: Status as of December 31, 2011. Web site:
  15. Griffin J. (1982) The welfare implications of externalities and price elasticities for telecommunications pricing. Review of Economics and Statistics 64(1): 59–66CrossRefGoogle Scholar
  16. Hausman J., Tardiff T., Belinfante A. (1993) The effects of the breakup of AT&T on telephone penetration in the United States. American Economic Review 83(2): 178–184Google Scholar
  17. Hausman, J. (1997). Valuing the effect of regulation on new services in telecommunications. Brookings papers on economic activity: Microeconomics (pp. 1–54). Web site:
  18. Hausman J. (1998) Taxation by telecommunications regulation. Tax Policy and the Economy 12: 29–48Google Scholar
  19. Hausman, J. (2000). Regulated costs and prices in telecommunications. In G. Madden & S. J. Savage (Eds.), The international handbook of telecommunications economics , Vol. II. (Chapter 12). Northampton, Massachusetts: Edward Elgar.Google Scholar
  20. Hausman, J. (2002). Mobile telephone. In M. Cave et al. (Eds.), Handbook of telecommunications economics . North Holland. Chapter 13.Google Scholar
  21. Hausman J., Leonard G., Sidak J. G. (2002) Does bell company entry into long-distance telecommunications benefit consumers?. Antitrust Law Journal 70: 463–484Google Scholar
  22. Hausman, J., & Sidak, J. G. (2007). Telecommunications regulation: Current approaches with the end in sight. NBER. Web Site:
  23. Iowa Utils. Bd. v. FCC. (2000). 219 F.3d 744 (8th Cir. 2000). Web site:
  24. Kahn A. (1971) The economics of regulation: Principles and institutions, Vol. 2. Wiley, New YorkGoogle Scholar
  25. Kahn A. (1979) The Richard T. Ely lecture: Applications of economics to an imperfect world. American Economic Review, Papers and Proceedings 69(2): 1–13Google Scholar
  26. Kahn, A. (1984). The uneasy marriage of regulation and competition. Telematics, 1, 1–2, 8–17.Google Scholar
  27. Kahn A., Shew W. (1987) Current issues in telecommunications regulation: Pricing. Yale Journal on Regulation 4: 191–256Google Scholar
  28. Kahn A. (1987) Deregulatory schizophrenia. California Law Review 75(3): 1059–1068CrossRefGoogle Scholar
  29. Kahn A. (1988a) The economics of regulation, Vol. 1. MIT Press, CambridgeGoogle Scholar
  30. Kahn A. (1988b) The economics of regulation, Vol. II. MIT Press, CambridgeGoogle Scholar
  31. Kahn A. (1992) Market power issues in deregulated industries. Antitrust Law Journal 60(3): 857–866Google Scholar
  32. Kahn, A. (1993). Testimony before the State of New York Public Service Commission in the petition of Rochester telephone corporation for approval of proposed restructuring plan (Panel on Public Policy Issues with Robert W. Crandall), Case Nos. 93-C-0033 and 93-C-0103.Google Scholar
  33. Kahn, A. (1994a). Affidavit: In the matter of price cap performance review for local exchange carriers, notice of proposed rulemaking, FCC CC Docket No. 94-1.Google Scholar
  34. Kahn A. (1994b). Panel direct and rebuttal testimony before the State of New York Public Service Commission in the petition of Rochester telephone corporation for approval of proposed restructuring plan on public policy issues in support of settlement.Google Scholar
  35. Kahn A., Taylor W. (1994) The pricing of inputs sold to competitors: A comment. Yale Journal on Regulation 11(1): 225–240Google Scholar
  36. Kahn, A. (1996). Ask not the bells for tolls. Wall Street Journal, August 6, p. A14.Google Scholar
  37. Kahn, A. (1997). Statement in support of The Southern New England telephone company’s proposed reorganization.Google Scholar
  38. Kahn A. (1998) Letting go: Deregulating the process of deregulation. MSU Public Utility Papers, East Lansing, MIGoogle Scholar
  39. Kahn A., Tardiff T., Weisman D. (1999) The telecommunications act at three years: An economic evaluation of its implementation by the federal communications commission. Information Economics and Policy 11: 319–365CrossRefGoogle Scholar
  40. Kahn A. (2001) Whom the gods would destroy, or how not to deregulate. AEI-Brookings Joint Center for Regulatory Studies, Washington D.C.Google Scholar
  41. Kahn, A., & Taylor, W. (2002). Declaration: In the matter of AT&T Corp. petition for rulemaking to reform regulation of incumbent local exchange carrier rates for interstate special access services, FCC RM No. 10593.Google Scholar
  42. Kahn, A. (2003). Regulatory politics as usual. Washington D.C.: AEI-Brookings Joint Center. Web site:
  43. Kahn A. (2004) Lessons from deregulation. AEI-Brookings Joint Center for Regulatory Studies, Washington D.C.Google Scholar
  44. Kahn, A. (2005). Economic Justification for Telus’ Two-Facility Bright-Line Forbearance Test. Appendix 3 to comments of Telus Communications Inc. in Canadian Radio-television Telecommunications Commission, Docket PN-2005-2.Google Scholar
  45. Kahn, A. (2006). a democratic voice of caution on network neutrality. The Progress & Freedom Foundation. Retrieved November 7, 2012 from
  46. Kahn, A. (2007). Network neutrality. Washington D.C.: AEI-Brookings Joint Center for Regulatory Studies, Working Paper RP07-05. Web site:
  47. Keynes J. M. (1936) The general theory of employment, interest, and money. Harcourt, Brace & World, New YorkGoogle Scholar
  48. Laffont J.-J., Tirole J. (1993) A theory of incentives in procurement and regulation. MIT Press, CambridgeGoogle Scholar
  49. Laffont J.-J., Tirole J. (2000) Competition in telecommunications. MIT Press, CambridgeGoogle Scholar
  50. Litan, R., & Singer, H. (2007). Slouching towards Mediocrity: unintended consequences of net neutrality regulation. Journal on Telecommunications and High Technology Law. Web site:
  51. Mueller M. (1997) Universal service: Competition, interconnection, and monopoly in the making of the American telephone system. MIT Press, CambridgeGoogle Scholar
  52. Perl L. (1983) Residential demand for telephone service. National Economic Research Associates, Inc, White Plains, NYGoogle Scholar
  53. Perl, L. (1985). Social welfare and distributional consequences of cost-based telephone pricing. (Paper presented at the 13th annual telecommunications policy research conference, Airlie House, Virginia).Google Scholar
  54. Posner R. A. (1975) The social costs of monopoly and regulation. The Journal of Political Economy 83(4): 807–828CrossRefGoogle Scholar
  55. Sichter, J. (1977). Separations procedures in the telephone industry: The historical origins of a public policy. Cambridge: Harvard University Program on Information Resources, Publication P-77-2.Google Scholar
  56. Taylor L. (1994) Telecommunications demand in theory and practice. Kluwer Academic Publishers, BostonCrossRefGoogle Scholar
  57. Temin P. (1987) The fall of the bell system. Cambridge University Press, New YorkCrossRefGoogle Scholar
  58. U.S. Department of Justice. (1980). US v. AT&T, CA No. 74-1698, U.S. Dist. Ct., Dist. of Columbia, Plaintiff’s third statement of contentions and proof. Quoted in Temin (1987, p. 357).Google Scholar
  59. Weinhaus C., Oettinger A. (1988) Behind the telephone debates. Ablex Publishing Corporation, Norwood, New JerseyGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  1. 1.MIT Department of EconomicsMassachusetts Institute of TechnologyCambridgeUSA
  2. 2.National Economic Research Associates, Inc.BostonUSA

Personalised recommendations