Regulatory regimes and efficiency in US local telephony

Abstract

The paper assesses the efficiency consequences of different regulatory regimes for US local telephony. Specifically, alternative regulatory regimens (price-cap regulation and incentive regulation) are contrasted with traditional rate-of-return regulation (ROR). Relative efficiency scores are obtained from the Data Envelopment Analysis (DEA) approach. The regression analysis on the determinants of efficiency, after controlling for technical change effects, indicates that alternative forms of regulation appear to induce a higher level of efficiency for the regulated firms than ROR.