Bureaucratic Leverage over Policy Choice: Explaining the Dynamics of State‐Level Reforms in Telecommunications Regulation

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While state governments have enjoyed greater control over regulating local telephone service providers since 1984, movement toward efficiency‐based policy reform (e.g., adoption of competitive markets) has proceeded slowly. We investigate this pattern by addressing how the degree of policy discretion held by state public utility commissions (PUCs) affects reform of local telephone exchange regulation. Using precise measures of both PUC discretion and state policy changes over time, we find that states with “stronger” PUCs (more policymaking authority) are significantly more likely to move toward efficiency‐based policy regimes and away from traditional rate‐of‐return regimes. Greater PUC discretion systematically related to state adoption of efficiency‐based reforms over time suggests that regulators are using updated information about policy impacts to inform their policymaking activities. Our findings contradict a common presumption that regulatory bureaucracies are simply motivated by a desire to increase their control over policymaking. Instead, state PUCs are a key source of telecommunications policy reform in the states.