The effects of transitional regulations in the telecommunications industry

Before the 1980s the telecommunications industry was considered to be a representative natural monopoly by governments but rapid technological developments have eroded away such characteristics, which has led many governments to deregulate or to introduce competition in this industry. The regulators have adopted new regulatory restrictions in the transition of this industry to reduce impacts associated with regime changes. This dissertation examines the effectiveness of these transitional regulations by three empirical studies.; The first study investigates whether incentive regulations have been successful in correcting distortions associated with the traditional rate-of-return regulation in the U.S. local telecommunications industry. Measures of allocative efficiency are specified as a function of incentive regulation and are estimated using econometric technique to identify cost functions. The results show that incentive regulation has not been better at improving allocative efficiency than has rate-of-return regulation, which can be attributed to many of the restrictions in incentive regulations.; The second study examines the welfare effects of the asymmetric competition adopted by the Korean government into its international telephone markets. The estimation results indicate that this policy failed to shift demand curves upward, and therefore failed to increase social welfare. The welfare lost due to such regulations was calculated using the backward induction method. The results show that the Korean society paid huge opportunity costs for this policy.; The third study investigates the effects of regulatory variables on the entry decision of Competitive Access Providers (CAPs), which provide large business customers with access services to long-distance networks in the U.S. telecommunications industry. The estimation results from various panel data models support the hypothesis that competitions in intraLATA toll markets encourage the CAPs' entry, but do not support the hypothesis that the CAPs' entry causes average access charges to decline.