Randolph Beard - Academia.edu (original) (raw)

Papers by Randolph Beard

Regulation Under Increasing Competition, 1999

One of the cornerstones of the Telecommunications Act of 1996 (without which the Act probably wou... more One of the cornerstones of the Telecommunications Act of 1996 (without which the Act probably would not have been passed) is Section 271.1 This Section establishes the criteria under which the Regional Bell Operating Companies (RBOCs) will be allowed to enter (or, more accurately, reenter) the interLATA long-distance market. Specifically, under the 271 provisions, an RBOC’s reintegration within its certificated geographic territory is made contingent upon the satisfaction of four necessary preconditions.3

SSRN Electronic Journal, 2005

While scores of papers have drawn on the basic insights of the early founders of the economic the... more While scores of papers have drawn on the basic insights of the early founders of the economic theory of regulation, the ability to cogently present the general form of the theory in a readily accessible graphical format has only recently emerged. While providing a promising approach for illustrating and analyzing regulatory (and deregulatory) outcomes, however, the analysis presented to this point appears to require the derivation of several different graphs. The result is that, while stemming from a single paradigmatic framework, the graphical approach fails thus far to offer a single unified basis for illustrating the general economic theory of regulation. In this paper, we seek to fill this lacuna by providing a simple, yet powerful, unifying graphical construct for presenting the myriad implications of that theory. (JEL D72, L51)

The Journal of Economic Education, 2007

ABSTRACT Although many authors have drawn on the basic insights of the early founders of the econ... more ABSTRACT Although many authors have drawn on the basic insights of the early founders of the economic theory of regulation, the ability to cogently present the general form of the theory in a readily accessible graphical format has only recently emerged. Although providing a promising approach for illustrating and analyzing regulatory and deregulatory outcomes, the analysis presented to this point appears to require the derivation of several graphs. The result is that, although stemming from a single paradigmatic framework, the graphical approach fails to offer a single unified basis for illustrating the general economic theory of regulation. The authors seek to fill this lacuna by providing a simple yet powerful unifying graphical construct for presenting the myriad implications of that theory.

International Journal of Industrial Organization, 2003

The emergence of competition in traditional public utility industries has given rise to a number ... more The emergence of competition in traditional public utility industries has given rise to a number of challenges to both positive and normative theories of regulation. Perhaps none created more controversy than the debate regarding embedded cost recovery once a regulated monopoly is opened to competition. Of particular concern is the prospect that embedded costs that have been incurred in a monopoly environment will be unrecoverable (i.e., stranded) in a competitive environment. In this paper, we develop a model of the socially optimal level of stranded cost recovery for a regulated firm facing the prospect of competition for its services under the assumption that past actions by the firm and regulators were rational. Some very useful generalizations emerge from the analysis. Among these, perhaps the most important is that under reasonable assumptions full recovery of a firm's costs that are stranded by competition is not generally socially optimal.

Management Science, 1994

The assumption that agents engage in maximizing behavior, while ubiquitous in economic theory, di... more The assumption that agents engage in maximizing behavior, while ubiquitous in economic theory, differs from the assumption that agents are willing to rely on the maximizing behavior of others. This paper offers an empirical examination of this distinction using experimental methods. Utilizing a series of experimental treatments based on a simple, two player extensive form game of perfect information, we find strong evidence that apparently rational people are often unwilling to rely on the self-interested behavior of others, despite the observed near universality of maximizing play.

We study the implications of extending public-insurance coverage to an existing medical market in... more We study the implications of extending public-insurance coverage to an existing medical market in Salop's spatial model of imperfect competition. In this setup a public insurer sets a price to medical providers, which must maintain their reservation pro…t from selling on the spot market directly to consumers. We show that the public insurer can manipulate this reservation pro…t by setting the coinsurance rate, and that setting the coinsurance rate properly yields the market …rst best product diversi…cation. The results survive generalizations including moral hazard and incomplete coverage. When adding quality choice to the analysis, a minimum quality standard that is combined with a proper coinsurance rate can still support market e¢ ciency. JEL Classi…cation: : I-13, I-18, K-35

We combine regression and propensity score methods to estimate the effect of Internet use on job ... more We combine regression and propensity score methods to estimate the effect of Internet use on job search. We exploit the distinction between the unemployed and the discouraged, where both desire employment but the latter has ceased active job search due to negative beliefs about the labor market. Results indicate broadband use at home or at public locations reduces discouragement by over 50 percent. Our findings suggest Internet use keeps the jobless active in job search and may equate to more employment. Our results also demonstrate public connections (e.g., at libraries) in unserved and underserved areas may produce substantial societal benefits. JEL Codes: J2, J6

The B.E. Journal of Economic Analysis & Policy, 2018

We study the implications of extending public-insurance coverage over differentiated medical prod... more We study the implications of extending public-insurance coverage over differentiated medical products of the same therapeutic group to market outcomes. The public insurer can set the reimbursement level for medical providers and the copayment for the insured for medical care provided under the policy coverage, but cannot directly control providers’ spot sales (outside of insurance) price. In this setup, the price offered by the public insurer to medical providers must maintain their reservation profit from selling on the spot market directly to consumers. We show that the public insurer can manipulate this reservation profit by setting the copayment rate, and thereby promote market welfare while increasing consumers’ surplus due to lower medical prices and lower market entry. The results survive generalizations including moral hazard and incomplete insurance coverage.

Southern Economic Journal, 2017

This article presents a model of optimal copyright policy which incorporates several realistic fe... more This article presents a model of optimal copyright policy which incorporates several realistic features which have hitherto been largely ignored. First, although copyright is understood as a means of encouraging the creation of new works, the optimal number of such works is generally not considered. Second, copyright infringement encompasses two different activities subsumed under the same legal umbrella: One might either "pirate" (i.e., illegally copy) a work or one might create a "new" work which is a close imitation of an existing one. The mutual recognition of these two features leads to some surprising conclusions relevant to current debate over copyright reform. In particular, while strong piracy protection encourages overproduction of intellectual property, enhanced protection against imitation can mitigate the associated inefficiencies, benefitting society.

The Antitrust Bulletin, 2007

The potentially conflicting competitive effects of interfirm contracts were an important focus of... more The potentially conflicting competitive effects of interfirm contracts were an important focus of early Sherman Act cases. Justice Peckham struggled with this issue in five major opinions handed down between 1897 and 1899.

The security necessary for investment and income growth is difficult to establish in areas where ... more The security necessary for investment and income growth is difficult to establish in areas where the government is weak. A prescriptive political objective for unstable countries is to strengthen the government's ability to make credible commitments to establish security. We model the production of security in regions characterized by relatively weak central governments as a pseudo-public goods provision game in which both national and local authorities make contributions to jointly determine the level of public security. Strategic underinvestment in security by the government occurs whenever the government is able to credibly pre-commit to a minimum level of public safety. When the central government is unable to pre-commit, aggregate security (and economic output) is higher than under pre-commitment, and it increases as the locals become more efficient at security provision. We show free riding by central powers on local authorities potentially describes the security structure of inner-city neighborhoods and prisons in the United States, despite a strong central government with the capacity to make credible commitments.

Federal Communications Law Journal, 2002

Whether there will be any significant improvements remains to be seen. See, e.g., Peter S. Goodma... more Whether there will be any significant improvements remains to be seen. See, e.g., Peter S. Goodman, FCC Sitting Out Telecom War, WASH. POST, May 3, 2001, at El, E9. 5. While the "last mile" of the local exchange network is perhaps the most challenging trial for competition policy, the supply-side economics of many other components of the local exchange network, including switching and transport, also prohibit large-numbers competition. 6. The "last mile" is a term of reference and is not meant to describe a "measured mile." Instead, the "last mile" can be as small as a few feet or yards.

Law and Contemporary Problems, 2014

One of the barriers to ending the prohibition on compensated organ donations is that people do no... more One of the barriers to ending the prohibition on compensated organ donations is that people do not have a good idea what a legal, compensated system would look like. The ban on compensation is nearly global, and has existed, de facto or de jure, almost since the development of immunosuppressive drugs made donations from unrelated individuals feasible. The resulting dearth of first-hand knowledge of a working system that involves compensated donations helps to sustain the prohibition on "valuable consideration," 1 despite the huge morbidity and mortality costs associated with the persistent and growing organ shortage. 2 Resistance to compensation is further bolstered by (understandable) revulsion at what an unregulated, highly commercialized market in human organs would likely involve. 3 Media reports of the existing "unregulated" organ market-that is, of the largely illegal black

SSRN Electronic Journal, 2007

The purpose of patent policy is to balance the incentive to invent against the ability of the eco... more The purpose of patent policy is to balance the incentive to invent against the ability of the economy to utilize and incorporate new inventions and innovations. Substandard patents that upset this balance impose deadweight losses and other costs on the economy. In this paper, we examine some of the deadweight losses that result from granting substandard patents in the United States. Under plausible assumptions, we find that the economic losses resulting from the grant of substandard patents can reach 21billionperyearbydeterringvalidresearchwithanadditionaldeadweightlossfromlitigationandadministrativecostsof21 billion per year by deterring valid research with an additional deadweight loss from litigation and administrative costs of 21billionperyearbydeterringvalidresearchwithanadditionaldeadweightlossfromlitigationandadministrativecostsof4.5 billion annually. This brings the total deadweight loss created by our "dented" patent system to be at least $25.5 billion annually. These estimates may be viewed as conservative because they do not take into account other economic costs from our existing patent system, such as the consumer welfare losses from granting monopoly rents to patent holders that have not, in the end, invented a novel product, or the full social value of the innovations lost.

Initial Public Offerings: Findings and Theories, 1995

ABSTRACT To effect an IPO in modern times the private company must seek permission from the Secur... more ABSTRACT To effect an IPO in modern times the private company must seek permission from the Securities and Exchange Commission (SEC). In administering the Securities Act of 1933, the SEC requires the selling company to publicly disclose pertinent facts about the firm’s business, current operations, management, primary shareholders, and financial condition. Before the regulation and process of a current-day IPO is considered, a brief review of early IPOs may be appropriate.

Initial Public Offerings: Findings and Theories, 1995

SSRN Electronic Journal, 2003

This Essay addresses probably the most critical issue in modern competition policy for the teleco... more This Essay addresses probably the most critical issue in modern competition policy for the telecommunications industry: the impairment standard by which network components are selected for unbundling. This standard has been defined twice by the Federal Communications Commission ("FCC") and twice remanded by the Supreme Court. We provide an explanation as to why, and propose a more sound definition of impairment based on the statute and economic science. The Essay also provides a simple theoretical model of impairment and then estimates an econometric model derived from the theory. The econometrics deal with the relationship between the Unbundled Network Element-Platform and the Unbundled Network Element-Loop, which some view as substitute modes of entry. The Unbundled Network Element-Platform-by far the most successful mode of entry in local exchange markets-requires the use of unbundled switching, which the incumbent carriers do not want to provide as an unbundled element. The statistical model determines whether the two are substitutes, and whether impairment exists with respect to unbundled switching. This issue is the most contentious debate at the FCC and state regulatory agencies, and the fifty state proceedings initiated by the FCC's Triennial Review Order will deal exclusively with whether or not unbundled switching should be an unbundled element.

SSRN Electronic Journal, 2009

Market definition is an essential ingredient to competitive and regulatory analysis. Yet, there i... more Market definition is an essential ingredient to competitive and regulatory analysis. Yet, there is significant disparity regarding the definition of the relevant geographic market for high-capacity circuits, commonly referred to as Special Access services. Given the present debate over expanding price regulation in this sector, the importance of market definition on the expected economic effects of regulation is worth evaluating. In this article, we demonstrate that if geographic markets are "location specific" and supplied by a monopolist as the proponents of regulation claim, then price regulation reduces economic welfare in all instances. That is, even with monopoly supply, regulation offers no improvement in economic welfare, meaning the debates over the extent of competition and profit margins in such markets are irrelevant. The effect of regulation is mostly to transfer profits from sellers to buyers, so the debate appears to be largely a squabble over rents. That said, every 1oftransfercostsmorethan1 of transfer costs more than 1oftransfercostsmorethan1 to society, so regulation reduces welfare. This analysis demonstrates that the present case for regulating high-capacity services is woefully inadequate and poorly conceived.

SSRN Electronic Journal, 2004

The Bell Operating Companies ("BOCs") argue that Total Element Long Run Incremental Cost (TELRIC)... more The Bell Operating Companies ("BOCs") argue that Total Element Long Run Incremental Cost (TELRIC) prices set by State public service commissions have no nexus to the BOCs' actual forward-looking costs but are, instead, based on retail prices with the goal of ensuring that competitors have an adequate (if not outright excessive) margin, thus resulting in "parasitic" competition. This Policy Paper, however, empirically demonstrates that the data do not support the Bells' contentions, finding that the wholesale price for combination of unbundled elements is motivated primarily by forward-looking costs and secondarily by BOC retail profit margins. Simply stated, wholesale prices for UNE-P are not directly related to retail prices for local telephone service. In fact, rather than set rates below costs, the States more often than not have actually preserved some BOC profit in a politically-sensible "50/50" split between the desired outcomes of new entrants and the incumbents. The fact that BOC margins are declining is an intended consequence of Section 251(d) the 1996 Act and a rational public policy, because TELRIC pricing deliberately does not incorporate the monopoly rents the BOCs have traditionally enjoyed in the wholesale prices for UNEs.

SSRN Electronic Journal, 2004

While the "last mile" of the local exchange network is perhaps the most challenging trial for com... more While the "last mile" of the local exchange network is perhaps the most challenging trial for competition policy, the supply-side economics of many other components of the local exchange network, including switching and transport, also prohibit large-numbers competition. 6. The "last mile" is a term of reference and is not meant to describe a "measured mile." Instead, the "last mile" can be as small as a few feet or yards.

Regulation Under Increasing Competition, 1999

One of the cornerstones of the Telecommunications Act of 1996 (without which the Act probably wou... more One of the cornerstones of the Telecommunications Act of 1996 (without which the Act probably would not have been passed) is Section 271.1 This Section establishes the criteria under which the Regional Bell Operating Companies (RBOCs) will be allowed to enter (or, more accurately, reenter) the interLATA long-distance market. Specifically, under the 271 provisions, an RBOC’s reintegration within its certificated geographic territory is made contingent upon the satisfaction of four necessary preconditions.3

SSRN Electronic Journal, 2005

While scores of papers have drawn on the basic insights of the early founders of the economic the... more While scores of papers have drawn on the basic insights of the early founders of the economic theory of regulation, the ability to cogently present the general form of the theory in a readily accessible graphical format has only recently emerged. While providing a promising approach for illustrating and analyzing regulatory (and deregulatory) outcomes, however, the analysis presented to this point appears to require the derivation of several different graphs. The result is that, while stemming from a single paradigmatic framework, the graphical approach fails thus far to offer a single unified basis for illustrating the general economic theory of regulation. In this paper, we seek to fill this lacuna by providing a simple, yet powerful, unifying graphical construct for presenting the myriad implications of that theory. (JEL D72, L51)

The Journal of Economic Education, 2007

ABSTRACT Although many authors have drawn on the basic insights of the early founders of the econ... more ABSTRACT Although many authors have drawn on the basic insights of the early founders of the economic theory of regulation, the ability to cogently present the general form of the theory in a readily accessible graphical format has only recently emerged. Although providing a promising approach for illustrating and analyzing regulatory and deregulatory outcomes, the analysis presented to this point appears to require the derivation of several graphs. The result is that, although stemming from a single paradigmatic framework, the graphical approach fails to offer a single unified basis for illustrating the general economic theory of regulation. The authors seek to fill this lacuna by providing a simple yet powerful unifying graphical construct for presenting the myriad implications of that theory.

International Journal of Industrial Organization, 2003

The emergence of competition in traditional public utility industries has given rise to a number ... more The emergence of competition in traditional public utility industries has given rise to a number of challenges to both positive and normative theories of regulation. Perhaps none created more controversy than the debate regarding embedded cost recovery once a regulated monopoly is opened to competition. Of particular concern is the prospect that embedded costs that have been incurred in a monopoly environment will be unrecoverable (i.e., stranded) in a competitive environment. In this paper, we develop a model of the socially optimal level of stranded cost recovery for a regulated firm facing the prospect of competition for its services under the assumption that past actions by the firm and regulators were rational. Some very useful generalizations emerge from the analysis. Among these, perhaps the most important is that under reasonable assumptions full recovery of a firm's costs that are stranded by competition is not generally socially optimal.

Management Science, 1994

The assumption that agents engage in maximizing behavior, while ubiquitous in economic theory, di... more The assumption that agents engage in maximizing behavior, while ubiquitous in economic theory, differs from the assumption that agents are willing to rely on the maximizing behavior of others. This paper offers an empirical examination of this distinction using experimental methods. Utilizing a series of experimental treatments based on a simple, two player extensive form game of perfect information, we find strong evidence that apparently rational people are often unwilling to rely on the self-interested behavior of others, despite the observed near universality of maximizing play.

We study the implications of extending public-insurance coverage to an existing medical market in... more We study the implications of extending public-insurance coverage to an existing medical market in Salop's spatial model of imperfect competition. In this setup a public insurer sets a price to medical providers, which must maintain their reservation pro…t from selling on the spot market directly to consumers. We show that the public insurer can manipulate this reservation pro…t by setting the coinsurance rate, and that setting the coinsurance rate properly yields the market …rst best product diversi…cation. The results survive generalizations including moral hazard and incomplete coverage. When adding quality choice to the analysis, a minimum quality standard that is combined with a proper coinsurance rate can still support market e¢ ciency. JEL Classi…cation: : I-13, I-18, K-35

We combine regression and propensity score methods to estimate the effect of Internet use on job ... more We combine regression and propensity score methods to estimate the effect of Internet use on job search. We exploit the distinction between the unemployed and the discouraged, where both desire employment but the latter has ceased active job search due to negative beliefs about the labor market. Results indicate broadband use at home or at public locations reduces discouragement by over 50 percent. Our findings suggest Internet use keeps the jobless active in job search and may equate to more employment. Our results also demonstrate public connections (e.g., at libraries) in unserved and underserved areas may produce substantial societal benefits. JEL Codes: J2, J6

The B.E. Journal of Economic Analysis & Policy, 2018

We study the implications of extending public-insurance coverage over differentiated medical prod... more We study the implications of extending public-insurance coverage over differentiated medical products of the same therapeutic group to market outcomes. The public insurer can set the reimbursement level for medical providers and the copayment for the insured for medical care provided under the policy coverage, but cannot directly control providers’ spot sales (outside of insurance) price. In this setup, the price offered by the public insurer to medical providers must maintain their reservation profit from selling on the spot market directly to consumers. We show that the public insurer can manipulate this reservation profit by setting the copayment rate, and thereby promote market welfare while increasing consumers’ surplus due to lower medical prices and lower market entry. The results survive generalizations including moral hazard and incomplete insurance coverage.

Southern Economic Journal, 2017

This article presents a model of optimal copyright policy which incorporates several realistic fe... more This article presents a model of optimal copyright policy which incorporates several realistic features which have hitherto been largely ignored. First, although copyright is understood as a means of encouraging the creation of new works, the optimal number of such works is generally not considered. Second, copyright infringement encompasses two different activities subsumed under the same legal umbrella: One might either "pirate" (i.e., illegally copy) a work or one might create a "new" work which is a close imitation of an existing one. The mutual recognition of these two features leads to some surprising conclusions relevant to current debate over copyright reform. In particular, while strong piracy protection encourages overproduction of intellectual property, enhanced protection against imitation can mitigate the associated inefficiencies, benefitting society.

The Antitrust Bulletin, 2007

The potentially conflicting competitive effects of interfirm contracts were an important focus of... more The potentially conflicting competitive effects of interfirm contracts were an important focus of early Sherman Act cases. Justice Peckham struggled with this issue in five major opinions handed down between 1897 and 1899.

The security necessary for investment and income growth is difficult to establish in areas where ... more The security necessary for investment and income growth is difficult to establish in areas where the government is weak. A prescriptive political objective for unstable countries is to strengthen the government's ability to make credible commitments to establish security. We model the production of security in regions characterized by relatively weak central governments as a pseudo-public goods provision game in which both national and local authorities make contributions to jointly determine the level of public security. Strategic underinvestment in security by the government occurs whenever the government is able to credibly pre-commit to a minimum level of public safety. When the central government is unable to pre-commit, aggregate security (and economic output) is higher than under pre-commitment, and it increases as the locals become more efficient at security provision. We show free riding by central powers on local authorities potentially describes the security structure of inner-city neighborhoods and prisons in the United States, despite a strong central government with the capacity to make credible commitments.

Federal Communications Law Journal, 2002

Whether there will be any significant improvements remains to be seen. See, e.g., Peter S. Goodma... more Whether there will be any significant improvements remains to be seen. See, e.g., Peter S. Goodman, FCC Sitting Out Telecom War, WASH. POST, May 3, 2001, at El, E9. 5. While the "last mile" of the local exchange network is perhaps the most challenging trial for competition policy, the supply-side economics of many other components of the local exchange network, including switching and transport, also prohibit large-numbers competition. 6. The "last mile" is a term of reference and is not meant to describe a "measured mile." Instead, the "last mile" can be as small as a few feet or yards.

Law and Contemporary Problems, 2014

One of the barriers to ending the prohibition on compensated organ donations is that people do no... more One of the barriers to ending the prohibition on compensated organ donations is that people do not have a good idea what a legal, compensated system would look like. The ban on compensation is nearly global, and has existed, de facto or de jure, almost since the development of immunosuppressive drugs made donations from unrelated individuals feasible. The resulting dearth of first-hand knowledge of a working system that involves compensated donations helps to sustain the prohibition on "valuable consideration," 1 despite the huge morbidity and mortality costs associated with the persistent and growing organ shortage. 2 Resistance to compensation is further bolstered by (understandable) revulsion at what an unregulated, highly commercialized market in human organs would likely involve. 3 Media reports of the existing "unregulated" organ market-that is, of the largely illegal black

SSRN Electronic Journal, 2007

The purpose of patent policy is to balance the incentive to invent against the ability of the eco... more The purpose of patent policy is to balance the incentive to invent against the ability of the economy to utilize and incorporate new inventions and innovations. Substandard patents that upset this balance impose deadweight losses and other costs on the economy. In this paper, we examine some of the deadweight losses that result from granting substandard patents in the United States. Under plausible assumptions, we find that the economic losses resulting from the grant of substandard patents can reach 21billionperyearbydeterringvalidresearchwithanadditionaldeadweightlossfromlitigationandadministrativecostsof21 billion per year by deterring valid research with an additional deadweight loss from litigation and administrative costs of 21billionperyearbydeterringvalidresearchwithanadditionaldeadweightlossfromlitigationandadministrativecostsof4.5 billion annually. This brings the total deadweight loss created by our "dented" patent system to be at least $25.5 billion annually. These estimates may be viewed as conservative because they do not take into account other economic costs from our existing patent system, such as the consumer welfare losses from granting monopoly rents to patent holders that have not, in the end, invented a novel product, or the full social value of the innovations lost.

Initial Public Offerings: Findings and Theories, 1995

ABSTRACT To effect an IPO in modern times the private company must seek permission from the Secur... more ABSTRACT To effect an IPO in modern times the private company must seek permission from the Securities and Exchange Commission (SEC). In administering the Securities Act of 1933, the SEC requires the selling company to publicly disclose pertinent facts about the firm’s business, current operations, management, primary shareholders, and financial condition. Before the regulation and process of a current-day IPO is considered, a brief review of early IPOs may be appropriate.

Initial Public Offerings: Findings and Theories, 1995

SSRN Electronic Journal, 2003

This Essay addresses probably the most critical issue in modern competition policy for the teleco... more This Essay addresses probably the most critical issue in modern competition policy for the telecommunications industry: the impairment standard by which network components are selected for unbundling. This standard has been defined twice by the Federal Communications Commission ("FCC") and twice remanded by the Supreme Court. We provide an explanation as to why, and propose a more sound definition of impairment based on the statute and economic science. The Essay also provides a simple theoretical model of impairment and then estimates an econometric model derived from the theory. The econometrics deal with the relationship between the Unbundled Network Element-Platform and the Unbundled Network Element-Loop, which some view as substitute modes of entry. The Unbundled Network Element-Platform-by far the most successful mode of entry in local exchange markets-requires the use of unbundled switching, which the incumbent carriers do not want to provide as an unbundled element. The statistical model determines whether the two are substitutes, and whether impairment exists with respect to unbundled switching. This issue is the most contentious debate at the FCC and state regulatory agencies, and the fifty state proceedings initiated by the FCC's Triennial Review Order will deal exclusively with whether or not unbundled switching should be an unbundled element.

SSRN Electronic Journal, 2009

Market definition is an essential ingredient to competitive and regulatory analysis. Yet, there i... more Market definition is an essential ingredient to competitive and regulatory analysis. Yet, there is significant disparity regarding the definition of the relevant geographic market for high-capacity circuits, commonly referred to as Special Access services. Given the present debate over expanding price regulation in this sector, the importance of market definition on the expected economic effects of regulation is worth evaluating. In this article, we demonstrate that if geographic markets are "location specific" and supplied by a monopolist as the proponents of regulation claim, then price regulation reduces economic welfare in all instances. That is, even with monopoly supply, regulation offers no improvement in economic welfare, meaning the debates over the extent of competition and profit margins in such markets are irrelevant. The effect of regulation is mostly to transfer profits from sellers to buyers, so the debate appears to be largely a squabble over rents. That said, every 1oftransfercostsmorethan1 of transfer costs more than 1oftransfercostsmorethan1 to society, so regulation reduces welfare. This analysis demonstrates that the present case for regulating high-capacity services is woefully inadequate and poorly conceived.

SSRN Electronic Journal, 2004

The Bell Operating Companies ("BOCs") argue that Total Element Long Run Incremental Cost (TELRIC)... more The Bell Operating Companies ("BOCs") argue that Total Element Long Run Incremental Cost (TELRIC) prices set by State public service commissions have no nexus to the BOCs' actual forward-looking costs but are, instead, based on retail prices with the goal of ensuring that competitors have an adequate (if not outright excessive) margin, thus resulting in "parasitic" competition. This Policy Paper, however, empirically demonstrates that the data do not support the Bells' contentions, finding that the wholesale price for combination of unbundled elements is motivated primarily by forward-looking costs and secondarily by BOC retail profit margins. Simply stated, wholesale prices for UNE-P are not directly related to retail prices for local telephone service. In fact, rather than set rates below costs, the States more often than not have actually preserved some BOC profit in a politically-sensible "50/50" split between the desired outcomes of new entrants and the incumbents. The fact that BOC margins are declining is an intended consequence of Section 251(d) the 1996 Act and a rational public policy, because TELRIC pricing deliberately does not incorporate the monopoly rents the BOCs have traditionally enjoyed in the wholesale prices for UNEs.

SSRN Electronic Journal, 2004

While the "last mile" of the local exchange network is perhaps the most challenging trial for com... more While the "last mile" of the local exchange network is perhaps the most challenging trial for competition policy, the supply-side economics of many other components of the local exchange network, including switching and transport, also prohibit large-numbers competition. 6. The "last mile" is a term of reference and is not meant to describe a "measured mile." Instead, the "last mile" can be as small as a few feet or yards.