Cost Standards for Efficient Competition

  • Timothy J. Tardiff
Part of the Topics in Regulatory Economics and Policy Series book series (TREP, volume 37)


The three and one-half years since my last invitation to a Research Seminar provide an interesting background for how cost is being used to establish regulatory prices. By May 1996, the industry had made considerable theoretical and practical strides in replacing traditional cost-plus regulation with price regulation. While cost information can be an important component of such regimes, price regulation severs the direct link among costs, regulated prices, and allowed profit. And one of the primary motivations for the new approach was the belief that reducing regulatory micromanagement and increasing the utility’s incentives to act efficiently would produce superior outcomes and thereby be more conducive to the onset of competition.


Total Factor Productivity Federal Communication Commission Price Regulation Efficient Firm Access Price 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Alleman, James and Eli Noam, eds. 1999. The New Investment Theory of Real Options and its Implications for Telecommunications Economics. Boston, MA: Kluwer Academic Publishers.Google Scholar
  2. Association for Local Telecommunications Services. 2000. The State of Competition in the U.S. Local Telecommunications Marketplace,(February).Google Scholar
  3. Baumol, William J. 1999. “Having Your Cake: How to Preserve Universal Service Cross-Subsidies While Facilitating Competitive Entry.” Yale Journal on Regulation 16: 1–17.Google Scholar
  4. Baumol, William J. and Thomas W. Merrill. 1998. “Does the Constitution Require that We Kill the Competitive Goose? Pricing Local Phone Services to Rivals.” New York University Law Review 73: 1122–1148.Google Scholar
  5. Breyer, Steven. 1999a. Concurring in the relevant part of AT&T Corp. v. Iowa Utilities Board, 119 S. Ct. 721, 752.Google Scholar
  6. Breyer, Steven. 1999b. Dissenting in the relevant part of AT&T Corp. v. Iowa Utilities Board, 119 S. Ct. 721, 752.Google Scholar
  7. California Public Utilities Commission. 1989. Decision 89–10–031 (October 12).Google Scholar
  8. Crandall, Robert W. 1999. “The Telecom Act’s Phone-y Deregulation.” Wall Street Journal (January 27).Google Scholar
  9. Federal Communications Commission. 1996. Implementation of the Local Competition Provisions in the Telecommunications Act of 1996,CC Docket No. 96–98, First Report and Order (adopted August 1, released August 8).Google Scholar
  10. Federal Communications Commission. 1997a. Federal-State Joint Board on Universal Service,CC Docket No. 96–45, Report and Order (adopted May 7, released May 8).Google Scholar
  11. Federal Communications Commission. 1997b. Price Cap Performance Review for Local Exchange Carriers and Access Charge Reform,Fourth Report and Order in CC Docket No. 94–1 and Second Report and Order in CC Docket No. 96–262 (adopted May 7, released May 21).Google Scholar
  12. Federal Communications Commission. 1999a. Trends in Telephone Service (February).Google Scholar
  13. Federal Communications Commission. 1999b. Deployment of Wireline Services Offering Advanced Telecommunications Capability,CC Docket No. 98–147, First Report and Order and Further Notice of Proposed Rulemaking (adopted March 18, released March 31).Google Scholar
  14. Federal Communications Commission. 1999c. Implementation of the Local Competition Provisions in the Telecommunications Act of 1996,CC Docket No. 96–98, Third Report and Order and Fourth Further Notice of Proposed Rulemaking (adopted September 15, released November 5). “1999 Local Competition Order”Google Scholar
  15. Federal Communications Commission. 2000. Telecommunications @ the Millennium: The Telecom Act Turns Four, Office of Plans and Policy, ( February 8 ).Google Scholar
  16. HAI Consulting, Inc. 1998. HAI Model, Release 5.Oa, Model Description, Boulder, Colorado (February 2 ).Google Scholar
  17. Hausman, Jerry A. 1997. “Valuation and the Effect of Regulation on New Services in Telecommunications.” Brookings Papers on Economic Activity, Microeconomics: 1–38.Google Scholar
  18. Hausman, Jerry A. 1998. Testimony,before the California Public Utilities Commission, on behalf of Pacific Bell (April 8).Google Scholar
  19. Hausman, Jerry A. and Timothy J. Tardiff. 1995. Benefits and Costs of Vertical Integration of Basic and Enhanced Telecommunications Services, filed with the Federal Communications Commission, Computer III Further Remand Proceedings, CC Docket No. 95–20, on behalf of Bell Atlantic, Bell South, NYNEX, Pacific Bell, Southwestern Bell, and U S West (April 6 ).Google Scholar
  20. Hubbard, R. Glenn and William H. Lehr. 1994. Affidavit on behalf of Western Electric Company, Inc., and American Telephone and Telegraph Company, United States District Court for the District of Columbia, Civ. No. 82–0192 (HHG), Attachment 1: “An Analysis of Competition in U.S. Long-Distance Telephone Service” (December 5).Google Scholar
  21. Huber, Peter E. and Evan T. Leo. 1999. UNE Fact Report, filed with the Federal Communications Commission by the United States Telephone Association on behalf of Ameritech, Bell Atlantic, BellSouth, GTE, SBC, U S WEST, CC Docket No. 96–98 (May 26).Google Scholar
  22. Kahn, Alfred E. 1988. The Economics of Regulation, Cambridge, MA: The MIT Press.Google Scholar
  23. Kahn, Alfred E. 1998. Letting Go: Deregulating the Process of Deregulation, Michigan State University, The Institute of Public Utilities and Network Industries.Google Scholar
  24. Kahn, Alfred E., Timothy J. Tardiff, and Dennis L. Weisman. 1999. “The Telecommunications Act at Three Years: An Economic Evaluation of Its Implementation by the Federal Communications Commission.” Information Economics and Policy 11: 319–365.CrossRefGoogle Scholar
  25. Kovacic, William E. 1996. “Commissions, Courts, and the Access Pricing Problem.” In Pricing and Regulatory Innovations Under Increasing Competition, edited by Michael A. Crew. Boston, MA: Kluwer Academic Publishers.Google Scholar
  26. MCI Worldcom, Inc. 1999. Main Brief Before the Pennsylvania Public Utility Commission, Docket Nos. P-00991649 and 00991648 (July 22).Google Scholar
  27. Ordover, Janusz A. and Robert W. Willig. 1998. Declaration attached to AT&T’s and TCI’s Joint Reply to Comments and Joint Opposition to petitions to Deny or to Impose Conditions, In the Matter of Joint Application of AT&T Corp. and Tele-Communications, Inc. for Transfer of Control to AT&T of Licenses and Authorizations Held by TCI and its Affiliates or Subsidiaries, CS Docket No. 98–178 (November 13 ).Google Scholar
  28. Salomon, Smith Barney. 1998. “CLECs Surpass Bells in Net Business Line Additions for the First Time” (May 6).Google Scholar
  29. Supreme Court of the United States. 1999. AT&T Corp. v. Iowa Utilities Board,119 S. Ct. 721, 752.Google Scholar
  30. Tardiff, Timothy J. 1999. “The Growth of Local Exchange Competition: Implications for Telecommunications Regulation,” Presented at the Advanced Workshop in Regulation and Competition, 12th Annual Western Conference, San Diego, California (July 8 ).Google Scholar
  31. Tardiff, Timothy J. and William E. Taylor. 1996. “Revising Price Caps: The Next Generation of Incentive Regulation Plans.” In Pricing and Regulatory Innovations Under Increasing Competition, edited by Michael E. Crew. Boston, MA: Kluwer Academic Publishers.Google Scholar
  32. Telecommunications Act of 1996. Preamble.Google Scholar
  33. Telecommunications Reports 1999. “Bell Atlantic: Subsidiary Plan for DSL Would Cost $8 Per Line” (February 22).Google Scholar
  34. Weisman, Dennis L. 2000. “The (In)efficiency of the ‘Efficient Firm’ Cost Standard,” Antitrust Bulletin,forthcoming.Google Scholar

Copyright information

© Springer Science+Business Media New York 2000

Authors and Affiliations

  • Timothy J. Tardiff
    • 1
  1. 1.National Economic Research AssociatesUSA

Personalised recommendations