Is the Public Utility Concept Obsolete

8/14/2019 Is the Public Utility Concept Obsolete

1/14

The Board of Regents of the University of Wisconsin System

Is the Public Utility Concept Obsolete?Author(s): Edythe S. MillerSource: Land Economics, Vol. 71, No. 3, Social Control of Private Power: The Past and Futureof Public Utility Regulation (Aug., 1995), pp. 273-285

Published by: University of Wisconsin PressStable URL: http://www.jstor.org/stable/3146346.

Accessed: 08/06/2013 01:45

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at.http://www.jstor.org/page/info/about/policies/terms.jsp

.JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of

content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms

of scholarship. For more information about JSTOR, please contact [email protected].

.

The Board of Regents of the University of Wisconsin Systemand University of Wisconsin Pressare

collaborating with JSTOR to digitize, preserve and extend access toLand Economics.

http://www.jstor.org

This content downloaded from 103.10.154.1 on Sat, 8 Jun 201301:45:14 AMAll use subject to JSTOR Terms and Conditions
http://www.jstor.org/action/showPublisher?publisherCode=uwischttp://www.jstor.org/stable/3146346?origin=JSTOR-pdfhttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/stable/3146346?origin=JSTOR-pdfhttp://www.jstor.org/action/showPublisher?publisherCode=uwisc


2/14

Is the Public Utility Concept Obsolete?EdytheS. Miller

ABSTRACT.Publicutility egulations a uniquelyAmericanstructuralnnovation,and has evokedambivalence n thepart of thepublic,and moreparticularlyheeconomics rofession,ver heyears.Almost romthe timeof itsinception, iverse oiceshave sounded ts deathknell. Whilemany of theearlycriticsof regulation,rrespectivefphilosophicbent,recognizedhat inherent tructuralonditionspreclude he emergence f competition,ontempo-rarycriticsurgethatregulation e eliminated ndreplacedwithcompetition r a competitiveurro-gate. Thepaperexamines he opposingviewpointsand currentroposalsor regulatoryeform ithinthe contextof contemporarytructuralonditions.(JELL9)I. INTRODUCTION

It often is noted that economicsis highlymetaphorical.Of the manymetaphorscher-ishedtheremaybe none morepowerfulandenduringthan that of the invisible hand.Attachmentto this ideal, however,shouldnot be permittedto obscure market reali-ties. Undercertain conditionsmarket orcesare inadequate o protectagainstabuse; hatis, structuralpatternsdeprivethe invisiblehand of its ability to ensure optimal out-comes.The public utility concept and adminis-trative organizationoriginated primarily nthe United States to providethe social con-trol necessaryto prevent abuse of privatemarketpower by firms providingessentialservices. Recognition of this potential forabuse today seems blunted.Indeed, adher-ence to the metaphorof the invisible handmaybe strongerat presentthan at anytimeduring he last sixtyyears.The economics profession consistentlyhas manifested an ideological bias towardfree markets.In the past, however,somediversity of thought was tolerated. Manyeconomistsquestionedunconditionaladher-ence to noninterventionist ositions, nclud-ing members of the institutionalistschoolwhoplayedcentralroles in the developmentof a theory of public interest regulation

(Trebing1994, 200-10). The disciplineto-day,in contrast,exactsideologicalconform-ity.The contemporary cademic iteraturesalmost single-mindedn its endorsementoflaissez-faire.The message of the academicians isechoed invirtually verypublicpolicyforum-judicial, congressional,even regulatory.Deregulation and decentralization areequated with competition, irrespectiveofmarket conditions. For example, the 1982resolution of the antitrust suit againstAT&T, divesting he localoperatingcompa-nies, was widelyheralded as pro-competi-tive because it was deintegratingn effect.Recent energylegislationis hailedbecauseit is deregulatory ndthereforeperceivedascompetitive.The price cap decisions of theFederal Communications Commission(FCC) and many state commissions areviewed as advancingcompetitionbecausethey eliminate or erode traditionalrate-of-return (ROR) regulationand provide forprice flexibility. A recent Californiawheeling decisionincreasingdirectaccessin electricitymarkets is proclaimed a cru-cial step . . . to wider deregulationof theindustry and thereforeto the achievementof directcompetition Pasztorand Kansas1994, A13). In each of these cases thechangedstatus is extolled rrespective f therelativemarketstrengthof affectedparties.Yet market flawsremain; hey have not, asif by some stroke of these magical pens,been dissipated.The publicutilityconceptis not obsolete.It is not obsolete because,despite the pre-vailing ideology,not all markets are effec-

The author s unaffiliated.Her most recent affilia-tion was with the ColoradoPublicUtilities Commis-sion, where she served as commissionerand chair-woman.She is a past presidentof the Association orEvolutionaryEconomics,and was a recipientof theDistinguishedMember Award of the Transportationand PublicUtilities Groupof the AmericanEconomicAssociation.Land Economics * August 1995 * 71 (3): 273-85

http://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsp


3/14

274 LandEconomics August1995

tively or contestably competitive.Specificstructural conditions preclude the emer-genceof competition,make an emptythreatof potentialcompetition,and thwart he op-eration of automatic market mechanisms.Marketbarrierspreventthe entrythatgivesmeaning o the premiseof competition.De-spite the continuedviabilityof the publicutilityconcept,however, ts application ur-rently s at risk.

II. BARRIERSTO ENTRYINPUBLIC UTILITYMARKETSAmong the barriers hat impedethe de-velopmentof competition in public utilitymarkets are the following:The industriesare characterized yhighthreshold evelsofinvestment,mandatedat a minimumby thenecessityto connectand/or interconnectallcustomers.They thus also will have as dis-tinguishingfeatures the existence of sub-stantialsunk costs and a highfixedto vari-able cost ratio. The assetsof publicutilities,moreover, typically are substantiallynon-fungible.Incumbentprovidershave controlover essential bottleneck facilities, anduniquelyare grantedthe powerof eminentdomain.Public utilities typicallyserve a numberof distinctmarkets,with differingdemandelasticities.Thus,for some partof the com-modityor servicein question,demandwillbe highlyprice inelastic;that is, there willexist a highelementof necessity n demand.In addition,the requirement hat networksbe constructedin advanceof demand al-

most ensuresthe existenceof economiesofscale,when demand s properly orecasted.Public utilities also are distinguishedbythe substantial utilization of joint assets.The use of joint assets for the productionand distribution f multipleservicesensuresthat joint costs comprisea significantpro-portion of total costs, and is a source ofsignificanteconomies of scope. That is, in-vestment njointassetspermits he develop-mentanddistribution f multipleservicesatlower cost than if each service were re-quired to expend its stand-alone cost toconstructfor itself a self-containedmeansof operation.Moreover,the fact that net-

works essentiallyentail a large number ofsegmentscontributes o networkeconomiesof flow;the largerthe numberof segmentsincluded as part of a network,the greaterthe flow of traffic to all segments (Selwyn1994,22-24).Additional mpediments o the establish-ment of competitionin the current indus-trial environment nclude the presence ofsignificantexcess capacity,a common char-acteristic of publicutilities if only becausefacilities typically are constructed in ad-vance of demand.However,excesscapacityin these industriesmaybe more of a factorcurrently han in the past. For example,intelecommunicationsstructuralchange hasresulted in the installation of redundantnetworksby the variousfacilities-basedar-riers. In the electricindustry, major hrustof the Energy Policy Act of 1992 is thecreationof multiplesourcesof supplyandthe openingof the transmissionnetwork othe varioussupplysources.Public utility industriesalso are distin-guished by essential interdependencies,n-cluding he requiremento coordinateacrossmarkets.As with other impediments o en-try,the need for coordinationn these mar-kets is not a new phenomenon; t has ex-isted historically. Conspicuous examplesinclude interconnection n telecommunica-tions, interlining in transportation,andpowerpoolingin the electricindustry.How-ever,coordination equirements lso appearto have increasedin the currentenviron-ment.Forexample, he authorizationn theEnergyPolicy Act for the Federal EnergyRegulatoryCommission FERC)to requiremandatorywheeling is all but certain toincreasethe need for coordinationas trans-mission increases.Public utility industries also historicallyhave been characterized y the presenceofsignificantexternalities.The individualsdi-rectlyinvolveddo not bear all the costs orrealizeall the benefitsof transactions.Un-der suchcircumstances,trictlyprivatemar-ket considerationswill not bringabout op-timal results. Often recognized examplesinclude: n telecommunications,he benefitof the serviceto all consumers s enhancedby the interconnectivity f the network; n



4/14

71(3) Miller: ublicUtilityConcept 275

electricity,the service is degradedby thesimultaneousproductionof pollution as aby-productof the primarycommodity.Anadditional factor inhibiting the establish-ment of competitionin public utility mar-kets is customer inertia and loyalty to in-cumbentprovidersand established brands.Conditionssuch as these, in varyingcombi-nations, generate or constitute significantbarriers. It is importantto recognizethatthese are structural,rather than merelylegallyimposed,barriers o entryand exit.It is demonstrablyevident that publicutility networkstypicallyexhibit such char-acteristics.It is irrefutable hat publicutili-ties requirehigh minimum hresholdlevelsof investmentbecause of the need to inter-connect consumers and the commonprac-tice of constructingn advance of demand.Public utilities also are distinguishedby asubstantial elianceupon joint and commonassets that yield importanteconomies ofjoint service and product development.These structuralconditionsalso, however,give these entities significantstrategicma-neuverabilitythat permits market domi-nance.For example, the fact that consumptionin public utility markets is highly concen-trated gives firms the ability to segmentmarkets and differentiallyprice, favoringconsumers with higher price elasticities ofdemand over relatively demand-inelasticconsumers.Moreover, uppliervulnerabilityto the exerciseof monopsonypower(includ-ing the threat of bypass)enables high-usecustomers o extractpricereductionsand toachieve networkimprovementshat advan-tage these influentialgroups.Indeed,monopsonypower appearsto bea drivingforce behind many developmentsin publicutilitymarkets oday.Forexample,in gas markets, t appearsto be the motiveforce behind current steps to unbundletransportand marketing unctionsand thusenhance the abilityof industrialcustomersto secure low-costsourcesof supply. n elec-tric markets, t seems to be a driving orcebehindsteps to substituteprice negotiationfor priceregulation, hus effectivelyachiev-ing a system of selective discounting,andbehind decisions to permit high-use con-

sumersto pickand choose amongstsourcesof supply.This, in itself, gives to favoredclasses of consumers he abilityto abandon-or to threaten to abandon-the system,andto leave fixed and sunksystemcosts theresponsibilityf low-volume onsumers,whodo not have this option.In telecommunicationsmarkets,monop-sonypower appearsa primary actorbehindmany modernizationprograms.Moreover,low-usagecustomersmaybe allocateda dis-proportionatelyhigh share of the costs ofnetworkdevelopment.This occursbecauseirrespectiveof technical specificationsfordeliveryof particular ervices,these assetsneverthelessare jointly used to distributethe variousservices.The stagethus is set for the implementa-tion of practicesof market segmentation,cross-subsidization,ndpricediscriminationthat are self-sustainingand ensure marketdominance and high profits. It should benoted that the existence of incentivessuchas these and the potentialfor theirabuse inpublicutilitymarketsconsistentlyhas beenrecognized n the institutionalpublic utilityliterature.The existenceof economies of scale im-plies that it is necessaryfor companiestoachieve a high minimumefficient marketshare (MEMS)to reach the minimumeffi-cient scale(MES)of operation. f the MEMSis more than50 percentof the market,onlyone firmwill havethe ability o survive. f itis more than one-third, he marketwill notsupportmore than two firms.This require-ment gives to incumbentprovidersan im-portant-what, in fact, may be an insur-mountable-advantage over challengers.Recent research indicates that manytelecommunicationsmarketspresentlyarecharacterizedby high MEMS (e.g., Selwynand Hatfield1994).If competition s to sur-vive,however, he MEMS mustbe low.Un-derconditions nvolving highMEMS,mar-kets will,at best,be oligopolistic.It is important o emphasize he essentialinterrelationshipand interdependenceofthese characteristics.t is evident that theexistence of structural impediments pre-vents the developmentof competitionevenin the absence of legal barriers.Structural



5/14


imperfectionsmake possible specific pat-terns of behaviorthat, in turn, exacerbatestructuralflaws and conditions of marketconcentration.The patternsof dominancethat emergeconstitutethe interplayof thecombinedand interactiveeffects of interre-lated and interdependentstrandsof struc-ture, behavior,andperformance.The issueof the continuedviabilityof thepublic utility concept will be exploredfur-therprimarilyn referenceto telecommuni-cations,which providesvivid illustrationofmanyof these conditions.

III. THE CURRENTTELECOMMUNICATIONSENVIRONMENTThe contemporarytelecommunicationsera maybe viewedas havingbegunwith thereorganizationof the industryset forth inthe 1982 ConsentDecree and relatedordersthat concluded the U.S. Department ofJustice antitrust suit against AT&T. Itis useful to delineate three trends-whatmayindeedbe defining rends-of the cur-rent telecommunicationsra:diversification,modernization,and consolidationand con-centration.

DiversificationTo begin with, the 1982 Consent decreefreed AT&T from a prior agreementthathad limited its activities to regulatedcom-munications.Among the more importantadditionalprovisionsof the settlement was

the divestiturebyAT&T of its 22 operatingcompanies.It is important o note that thecompanieswere not to be divestedas inde-pendent entities, but as parts of sevenregional holding companies (RHCs). Inan attempt to prevent the abuse of themonopolybottleneckpower acquiredfromAT&T,the RHCs were subjected o certainline-of-business(LOB) restraints.Specifi-cally, the RHCs were prohibited rom pro-viding ongdistanceservice,engaging n themanufacture f equipment,or in the gener-ation or transmissionof information ser-vices. In addition,limitationswere placedupon RHC investment n unrelatedenter-

prises.In a relatedaction,the Cable Act of1984prohibited he offeringof video serviceby telephonecompaniesthroughtelephonelines in their serviceareas. In short order,many of these restrictionswere relaxed.Limitationsplacedupon investments n un-related endeavors and prohibitions n re-gard to information services were elimi-nated. The restrictions ncorporatedn theCable Act also were substantially ased.Implicit n what was includedand,morespecifically, n what was omitted from thecategoryof LOB restrictions,was that theRHCswerenow permitted o offer throughsubsidiariesrelated and unrelated servicesthat previously hey had been requiredtooffer only as part of their regulatedopera-tions,or hadnot been permitted o offer atall. It also is importantto note that thesubsidiariesformed to offer such servicesgenerally were organized as unregulatedsubsidiariesof the parentholding company,rather than of the local exchangecompany(LEC).Initial diversification activities of theRHCs includedactivities hat had been theprovinceof the regulatedLECs;for exam-ple, ownership f the profitable ellowpagesand cellular operations were transferredfromoperatingcompanies o parentholdingcompanies.Domestically, he RHCs movedaggressively nto a wide assortmentof un-regulatedactivities,ranging romreal estateto computer ervices o cable TV. Theyalsomovedforcefully nto foreignmarkets, ndi-viduallyandjointly acquiringand installingcellularandcablenetworks, urchasingargeequity blocks in public telephone compa-nies, and engaging n myriadenterprises ngeographic areas that spanned the globe.AT&T also moved assertively,diversifyinginto both domestic and foreign markets.That the processhas not been solely a one-way international low is demonstratedbyBritishTelecom'spurchaseof a 20 percentshare of MCI.The magnitudeand costs of these activi-ties raise a host of concerns about theirconsequences,mostparticularlyn regard othe future of basic telephone service.Thepost-divestiturera usheredin an unprece-dented mixed mode of monopolistic-com-



6/14


petitive, regulated-unregulatedenterprisecoexistingunder one roof. The RHC sub-sidiariesformedafter divestiture o providenonutilityservice initiallywere requiredtobe organizedas operationsthat were fullyseparatedfrom the LECs. While the abilityof the initial separation requirementstoprotect against cross-subsidizations notundisputed,at the least the separationrec-ognized this as a possibilityand attemptedto prevent indemnification of the riskynonutilityoperationsof the RHCs by basictelephoneservice.The separation requirements for themonopolyandcompetitiveactivitiesof thesecompanies subsequentlywere relaxed.Sig-nificantquestionsof risk and burdenshift-ing, present even when separationis re-quired, are magnifiedwith the easing ofrequirements.Deepening these concerns,recent research reveals that a preponder-ance of the capitalization f RHCnonutilityventures derive from Bell LEC operations,which account for by far the majorpart ofthe assets, revenues, and earningsof theRHCs. The research inds a generalpatternof diversionof funds awayfrom the regu-lated to the nonregulatedactivitiesof theRHCs and, moreover, that most of thenonutility operationsof the RHCs are ei-ther showing a loss, or generating verysmall returns. Indeed, it is found that inalmost every instance these unrelatedactivities are substantially underperform-ing RHC utility operations (Selwyn andMontgomery1993,2).These findingsraise significantquestionsof cross-subsidization nd of cost and riskshifting as between regulated basic ex-changeandunregulated ervices.For exam-ple, there is little question that the morespeculative undertakings of the holdingcompanieswill increase the creditrisk,andtherefore the capital costs, of the parentcompany.The capitalcosts of the regulatedentity accordinglywill be increased abovethe levels, and those of the unregulatedentitydecreasedbelow the levels,thatwouldhaveprevailed f the borrowingactivitiesofthe unregulatedentityhad not taken place,or if the total cost of these endeavorshadbeen assignedto the speculativeenterprise.

It shouldbe noted that such misgivings renot of recent origin, and do not applyuniquelyto a contemporary ra. Concernsaboutprecisely histypeof riskshiftinghavebeen expressed hrough he years by institu-tional public utility economists(e.g., Bon-brightand Means[1932]1969,198).Diversificationcarries the potential foradditional ypesof riskand burdenshifting.The potentialfor diversionof capital,man-agement,and labor from the monopolytothe competitiveside of the business exists.To prevent cross-subsidizationt is neces-sary to avoid sharing of personnel. Evenmore difficult to avoid is the transferofattention and enthusiasm from workadayutilityactivitiesto the more glamorousandtechnologicallymore sophisticatedactivitiesof the nontraditional ndeavors.Telephone industrynvestmentn nontra-ditional activities has been substantial.Atthe same time, RHCs are dramatically ut-ting local exchange costs. As part of thecost-cutting,and perhapsits majorvehicle,industry-wideabor force reductions havetakenplace (e.g., Keller1992,Al; 1994,A3;Cauley 1993, B6; 1994c, A3). To use theinelegant jargon of the day, widespreaddownsizing nd rightsizing layoffs),ac-companied by outsourcing contractingout) is occurring.The eliminationof unnecessaryobs is anunexceptionablepolicy.However, f overen-thusiastic work force paringresults in aninabilityto performnecessary asks,the re-sult is the degradation f service;a decreasein efficiency n real,if not m6netary, erms.1Moreover,if this occurs, cost burdensarenot eliminated,but simplyshifted.The bur-den is shifted,first of all, to the monopolysubscriberswhose servicequality uffers,and

1 Somequalityof serviceproblems urrentlymaybeemerging.Forexample,complaints f servicedegrada-tion in US Westterritory,ncluding eportsof substan-tial increases n held orders telephoneinstallationdelays)and of substantial epair delays,have been sonumerousandinsistent hat the ColoradoPublicUtili-ties Commission as institutedan investigationZeiger1994, 2C). It is difficultto determine if this is anisolated and localizedmatter,or a more widespreadphenomenon.



7/14

278 LandEconomics August1995then to workers,both those who have lostemployment, nd those who remainand noware required o do much with little.2Modernization

Recent advances in communicationstechnology have both transformed tradi-tional service and enlargedits menu of of-ferings.The use of digitaland optical fibertechnologiesincrease capacity,clarity,andspeed of communication, and hold thepromise of a near future provisionof anarrayof interactiveand multimedia simul-taneous distribution f voice, data,andvideoover the same transmissionpathway)ser-vices. It is indisputable hat these develop-ments have the potential to enhance thequalityof life substantially.This should notbe allowed to obscure the fact that therealso exist some potential abuses. Not leastof these is a strategicresponsemade possi-ble by modernization.There is wide supportwithin the tele-phone industryfor the developmentof anintegratedbroadband iberopticnetwork. tis acknowledged hat the capital require-ments of such a network are substantial.Abandonment of the traditional copperplantis required.Informedestimates of thenationwidecost of constructionrange up-wardfrom$250billionto $1 trillion.Supportersof such a system posit it asthe bptimal technology of the future, ameans to secure dazzlingnew capabilitiessuch as tele-medicine, tele-learning,tele-banking, tele-shopping, video-on-demand,andso forth, hatpromise o transform omelife, andimproveefficiencyandproductivityat the workplace. t also is assertedthat theeconomic efficiencythus achievedwill en-hance the abilityof this nation to competein the new global economy. Lurkingbe-hind the technological wonders, however,are a numberof controversialmatters,in-cluding questions about whetherparticulartechnologies are requiredfor specific ser-vices,the appropriatemeans of funding,andthe identification f suitableproviders.For example,it is clear that the existingcopper plant remains satisfactoryfor thedistribution f traditional ervices.However,

it is not entirely clear that it is not alsoserviceablefor the distributionof new, ad-vancedservices; hat is, that construction fa broadband, pticalfiber network s neces-sary. Advances in compression technologyhave increased the capacity(and thereforethe functionalityor these purposes)of theexisting copper plant. For example, asym-metricdigitalsubscriberooptechnologyde-veloped by Bell CommunicationsResearchCorporation permits the transmissionofvideo overcopperwire,withsufficient parecapacity to carry voice communications(Carnevale1993,Al).

Further, an integrated services digitalnetwork ISDN)permits he transmission fvoice, data,and video over the existingcop-per network. Required supportinginvest-ment requirementsare on a much smallerscale than those for broadbandand, more-over,much of the necessaryupgradealreadyhas occurred.The telephoneindustryn re-cent yearshas been upgradingplantto digi-tal switching,transmission,and signalling.In the last five years,AT&T has investedalmost $20 billion in digital switches,fiberoptic lines, and high-capacityransmissionequipment(Keller 1993, Al). The RHCs,since about the mid-1980s,have investedmorethan$100billionin networkdigitaliza-tion. They have not, however,widely de-ployed or offered ISDN; where offered, itseems targetedto a small number of busi-ness customers,at high rates (Selwyn1992,3-7).An upgradedplantused for the provisionof multipleservices s characterized s jointinvestment,whateverthe technicalrequire-ments for specific services.The nature ofthe cost allocationprocesspermitsa large

2 The willingnessof the RHCs to sell their ruraloperations n the interest of cost controlprovidesapossibleadditional xampleof costshifting.Thesale ofrural exchangesmay be a harbingerof an overalldeclinein qualityof servicefor nonurban egmentsofthe population.It also may be viewed as a possibleconcomitantor precursorof an erosion in a priornationaladherenceto principlesof universalservice.Under such circumstances he cost burden that hasbeen shifted s no less real because t is qualitative ndtherefore mmeasurable.



8/14


proportionof joint costs to be allocatedtolocal exchange.Thus,modernization tandsto be monopolyratepayer-fundedo a largeextent.Moreover, n the yearssince divesti-ture telephone companieshave soughtsub-stantial increases in rates and speed ofrecovery of depreciation, on grounds oftechnologicalobsolescence,despite the factthat the plant retains its serviceability ormanypurposes.Sincedivestiture, lose to 90percent of gross new rate base plant addi-tions has been funded by depreciationchargesrecovered from monopolyratepay-ers (Selwynand Hatfield 1994, 225-27). Inaddition,in the current environment hereis no assurancethat a new servicewill notbe moved to an unregulatedcategory if itbecomes profitable,ensuring hat monopolyratepayerswill be unableto capturefuturebenefits.The telecommunicationsndustryhas lit-tle to lose and much to gain by moderniza-tion. Not onlywill the replacement echnol-ogy be substantiallyfunded by monopolyratepayersbut the sophisticatednew tech-nologyalso is essentiallycentralizingMiller1993, 35). The significantcapital require-ments, assured excess capacity, high fixedand sunk costs, will constitute substantialbarriers o entryfor potentialrivals.ConsolidationndConcentration

Telecommunications ivestitureoccurredin the name-perhaps even the spirit-ofdecentralization.It did not take long forpatterns of recentralization to be estab-lished. First of all, the divestment of theoperating companies in seven RHCs itselfencouraged the endurance of preexistingmarketpower.The Bell operatingcompa-nies (BOCs) were separated, not as theatomistic entities celebrated in economicmyth and text, to which many of the as-sumptionsposited by the mainstreammightapply, but as power collectivities. Withintheir economicspheres,each RHCretainedmuchof the market and strategicpowerofthe formerparent, includingmost notably,control over essentialbottleneck facilities.Moreover, it is importantto recognizethat the politicalstrengthof the RHCs is at

least the equal of their economic strength.Their ability to wield political power andthus influence their economic environmentshouldnot be underestimated. orexample,immediatelyupon the specificationof theLOB restraints, the RHCs launched anintensive lobbying effort in almost everyconceivable orum-national and state:leg-islative, judicial,and regulatory-for theirelimination.3Theiruse of the full arsenalofpolitical weapons-financial contributions,extensive and expensive lobbying,employ-ment arrangements-to achieve this goal, iswell recognizedand has been documented(Wartzman nd Harwood1994,Al).The RHCs advocate for the eliminationof the LOB restraints n the name of com-petition and efficiency.They maintainthatendingthe restrictionswill increasecompe-titionbyincreasinghe numberof providers.There is little doubt,however,that the as-sumptionthat an increasein the numberofproviderswill increasecompetitiondoes nothold when one of the providershas thebuilt-in advantageof the use of monopolyrevenues to cross-subsidize ompetitiveac-tivities.It is evident that the RHCs do not be-lieve that the LOB restraints are perma-nent, and aredoingallwithintheirpowertomake of this a self-fulfillingprophecy.Theexpectation has led to employment of anumberof tacticalmaneuvers.The pace ofdevelopmentand deploymentof ISDN iswithin the controlof the RHCs. It is reason-

3For example, there have been introducedinCongressa successionof billspromulgated ydifferentinterests,prominently ncludingthe variousintereststhat now comprisethe telecommunicationsndustry,that would end the LOB restraintsundervarying on-ditions.These haveencountered upportor oppositionfrom the many involvedinterest groups, dependinguponthe conditionsmposed.The RHCs,for example,have opposedbills that wouldput teeth in a require-ment that the elimination f the restraints e accompa-nied by the openingof local service to competition.Severalof the RHCsalso havefiled a motion n federaldistrictcourt(undoubtedlywithone eye on the appel-late process)requestinghatJudgeHaroldGreene,thepresiding udge in the divestitureproceeding,dissolvethe consentdecreeandrelinquish versight f the localcompanies. f successful,his actioncould endthe LOBrestrictionsCauley1994b,B6).



9/14

280 LandEconomics August1995able to view the limitationsupon availabil-ity, failure to deploy and high rates pro-posed for the new ISDN technology asstrategic actics.It is to the advantage f theRHCs to keep conditionsas unfavorableaspossiblefor their future competitorswhen,as expected, the RHCs are allowed intothese markets.Amongthe availableweaponsis the strategicwithholdingof technology(Selwynand Hatfield1994,197-98).The RHCs also claim that they requirenew lines of businessbecause of increasedcompetition n presentmarkets. t shouldbenoted, however,that despite the adventofsuch new and competitivelydesignateden-deavorsas cellulartelephoneand Competi-tive Access Providers CAPs),99 percentofall local calls still must go through RHCnetworks; hat is, that RHCs retain 99 per-cent of local markets.4Moreover,rivals arebothdependentuponandvulnerable o LECactions.The Consent Decree approach o the es-sential facilitiesissue was to exclude RHCsfrom markets n whichthe use of their es-sential facilitiesis necessary,and thus hin-der theirability o leveragethis control ntoadjacentmarkets Selwynand Hatfield1994,46). The interexchange arriers IECs)con-tend that the LOB restrictions should bekept in place until certain changes are ef-fected.Thatis, theymaintain hatthe RHCsshould not be allowed into these marketsunless and until customers of the RHCshave a choice of providers n local markets,the service is offered througha separatesubsidiary,RHCs are requiredto pay thesame price as their competitors for callcompletion,and they are prohibitedfromusing sensitive customerinformation Car-nevale 1994, B4). The RHCs, in turn,pro-claim the present viabilityof local marketcompetition.Some also have announcedawillingness o open local markets o compe-tition in return for an end to the restric-tions, althoughdetails and time frame forthis are not well specified (Cauley 1994a,B7).The eliminationof the cross-ownershiprestrictionof the CableAct of 1982,underwhich LECs may not transportprogram-ming in their service territory s an addi-

tionalimportantpriorityor the RHCs.Theyalso have achievedsome success in the at-tainment of this goal. The FCChas recom-mended to Congressthat provisionsof theCableAct thatprohibitLECsfromofferingvideo service throughtheir telephonelinesbe dropped,and that LECsbe permitted ocarryvideo servicein their own areas.TheFCC terms this video-dial-tone;hat is, theprovisionof transmission apacity o multi-ple video programmers n a nondiscrimina-tory basis, in effect, commoncarriage.TheFCC also has entered a video-dial-toneor-der that authorizesLECs to install broad-band facilities n their serviceterritories hatintegrate transmissionof voice, data, andvideo, and to transportprogramming ro-videdbyothers over these facilities.In addi-tion, a Virginia federal district court hasfound the video programming rohibitionsin the Cable Act unconstitutionalon firstamendmentgroundsin applicationto BellAtlantic. The court authorizedBell Atlanticto provide video programmingn its ownserviceterritory.The easingof these restric-tions gives the RHCs the ability to moveextensively nto ancillary ields.In addition,we currentlyare witnessingin communicationsand related fields anextensive interindustryconsolidation andcentralization.Not too long ago, the RHCsand cable interests were widelyviewed ascontesting vigorously to be the first toinstallthe interactive,multimedia nfrastruc-ture of the future. Companiesacross theindustrialspectrumnow are takingturns-here competingas rivals, there cooperat-ing as partners, and then again asrivals-in their approach o future partici-pation in this infrastructure.On a widescale and across communications,nforma-

4 Thus, calls made to and from cellular phonespreponderantlyre madefromandto land-linephones.At the sametime, it shouldbe noted that AT&Tstillretains60-65 percentof the long-distancemarket,andthat the long-distancemarket s distinguished y con-scious parallelism n pricing,with AT&T supplyingobviousprice leadership.Such conditionsdo not in-spiremuch more confidence n the competitiveness fthe long-distancemarket han is warranted or local orshort-hauloll markets.



10/14

71(3) Miller: ublicUtilityConcept 281tion and entertainment industry lines-long-distance cellular, telephone/ cable,telephone entertainment, cable entertain-ment-a rash of successful and failedjointventures, acquisitions, and mergers beto-kenswhat seems a futureblurringof indus-trydistinctions.5All of this activityraisesimportantques-tions, including that of the purpose andresult of this activity.Forexample,are theregenuine public interest considerationsin-volved? That is, do the changes point toenhancedeconomic efficiency by, say, cap-turingeconomies of scale or scope? Or isthissimplya seriesof purelystrategicmoveswith the goal of securing strictly tacticaladvantages?Depending upon final resolu-tion, the net result of the changesunderwayin the communications, nformation, andentertainmentndustriescould be a verticalintegration hat wouldredefinethe conceptof end-to-endservice.In the pre-divestitureperiod, the termend-to-endservicehad a specificmeaning;treferredto the integratedR &D, manufac-turing, and transmission and distributionoperationsof AT&T. In the post-divestitureera there is the strong possibilitythat theterm will take on new meaning; hat is, thatit would signify the concentrationin fewhands of the generationand ownershipofcontent, programming,transmission, anddistribution.The potential for constrictionof access and for conflicts of interestas aresult of these changesare evident.It is difficulteven to speculateaboutthefutureconfiguration f this environment, rabout the identityof eventual winnersandlosers. There is little doubt, however,thatwhateverthe outcome, substantialcentersof powerwill remain.

IV. CONTEMPORARYREGULATION: N EXERCISEIN MINIMALISMIt is reasonableto interpretcurrent de-velopmentsas an indicationthat the tele-phone industry odayhas on its agendaoneoverridingpriorityand a numberof subpri-orities.Thedominantpriorityunderlyingheplan of action is the abrogationor mini-

mizationof regulatory uthority.To thisend,programsare proposedthat take shape as(1) to the extentpolitically easible,deregu-lation; (2) for services that remain regu-lated, the adoptionof alternativesto tra-ditional ROR regulation;(3) an end torestraintson entry ntoall ancillarymarkets;(4) the upgradeand modernizationof in-frastructure,using make-wholecost alloca-tion processes;and (5) the use of principlesof costing and pricingbased upon varyingdemandelasticities.The strategyto date may be judged tohave achieveda highdegreeof success.Thetelecommunicationsndustrynow is permit-ted to engage in a host of deregulatedoronlylooselyregulatedrelatedandunrelatedactivities.Moreover,an extensionof deregu-lation clearlyseems on the horizon.The goal of substituting,or servicesthatremainregulated,alternativeso traditionalROR regulation also appears close toachievement.At the federal level the FCChas adopted a price-capping system forAT&T and,to the extent of its jurisdiction,for the local operatingcompanies.Most ofthe states have replaced traditionalRORregulationwith one or anotherof the cur-rently popular options, variously dentifiedbytermssuchas price-capping,ncentive,orflexible pricing.The details of these pro-gramsvary substantiallyamong states andas between state and federal programs.

5Someprominent xamplesof recentcross-industrymoves to consolidate,both achievedanddiscontinued,include: in the long-distancecellular market, theAT&T purchaseof McCawCellular,a Sprint-Centelmerger,andan on-again, ff-againpurchasebyMCIofa share of Nextel.VariousRHC alliancesto combinetheir cellularoperations lso arein theworks.Concernis expressed hat the AT&Tpurchaseof McCawmayportenda reentryof AT&T nto localmarkets.In the telephone/cableindustries, he trend s evi-denced, orexample,bythe SouthwestBellpurchase ftwo cable systemsoutside of its serviceterritoryromHauserCommunications,he US West purchaseof a25percent hare n TimeWarner's ableandentertain-mentoperations,he abortedBellAtlantic-TCImerger,and the US West purchaseof two Atlantacable sys-tems.Companiesn the entertainment ndcable ndus-tries, andin entertainment nd networkTV also haveexpressednterest, n some cases not muchbeyond hetalking tage,in some form of alliance.



11/14


Conceptually, however, the plans centerupon the eliminationof earningsandprofitcontrolin favor of control overprices.Theelimination or relaxation of earnings andprofitcontrolin turnpermitsan increaseinthe gap betweenpricesand cost of service,an inattention to qualityof service and, atthe sametime, a decreasein regulatorydis-cretionand authority.Regulatory authorityalso is diminishedby the holding companyform of organiza-tion itself. As BonbrightandMeanspointedout in their classic study of the holdingcompanymorethansixtyyears ago, a majorattributeof the holding companystructureis its ability to distance itself from socialcontrol(Bonbrightand Means [1932]1969,6). In this seminal work, BonbrightandMeans recognizethat the holdingcompanyis not simplya purelyeconomicentitysub-ject only to economic laws, but a politicalforce as well. That is, they recognize thestrategicuse of the holdingcompanyas ameans both to movebusinessbeyond regu-latorycontroland to attenuateextantregu-latoryauthority.This is confirmedby currentexperience.The divestmentof the operatingcompaniesfrom AT&T as parts of regional holdingcompanieshas decreased he ability o exer-cise publicoversight.For example, spread-ing operationof specificservicecategoriesacrossmany urisdictions ttenuatescontroleven over regulatedservices.The provisionof both regulatedand deregulatedopera-tions by a single organizationmakes possi-ble variousforms of risk and burden shift-ing, one reason for the high prioritytheRHCs place upon terminationof restric-tions on theirmarketentry.Allocationpro-ceduresadoptedfor joint assets make pos-sible the use of costing techniques thatburden the core customer,as is illustratedin the case of telecommunicationsmodern-ization programs. The holding companystructure ncreases he longrecognized e.g.,Bonbrightand Means [1932]1969, 180-87)potential for abusive inter-affiliate ransac-tions. The holding companystructure hassignificantly einforced he deregulationnregulatoryclothing that is the currentex-perience in telecommunications.6

The rejectionof traditionalROR regula-tion, and the divorce between prices andcosts,also would be facilitatedby the adop-tion of costing and pricing proposals ad-vocated currently by many mainstreameconomists.In effect, under such proposalsconsumersof new, advanced,and custom-type services would be charged only theincrementalcost of upgrade requiredforprovision of that service,while monopolyratepayerswould be allocated all residualcosts. Thisproposal s madein the nameofeconomic,orPareto,efficiency, quatedwitha maximization f consumers'and produc-ers' surplus,and identifiedwith the publicinterest(Baumoland Sidak1994,26).The positionof the dominanteconomicsis that so long as the rates of demand-in-elastic consumersdo not exceedstand-alonecost and the rates of the demand-elasticconsumer cover its incremental cost, nocross-subsidization occurs. Accordingly,Baumoland Sidak(1994)suggestthe adop-tion of a system they call marketguidedregulation n which a range of prices isspecified when competition sufficient tocontrol prices does not exist. Prices, it isasserted,should range from the higher ofthe marginalor average ncremental ost ofthe service as the floor (for services to de-mand-elasticcustomers) o the stand-alone

6 That the contributionof the holding companystructure o the currenterosionof social control s notconfined to telecommunicationss demonstratedbyrecentdevelopmentsn the electricindustry.The En-ergy PolicyAct createda new classification f suppli-ers, exemptwholesalegenerators EWGs),entities en-gaged solely in the generationand sale of electricpowerat wholesale.EWGsareexempted romPUHCAregulation.In addition,regulatedutilities may haveownershipnterests n EWGs.Theythus are permittedboth to providea larger proportionof their supplyneeds frompurchasedpower,and to provide or themby purchases rom their EWG subsidiaries.The shiftfrom relianceupon self-generationo the use of pur-chasedpowerresults n differencesn regulatoryreat-ment (generation nvestment s rate based,purchasedpowercosts passed on to consumers),and a shift injurisdictional uthority state commissionshave juris-dictionover retail distribution,FERC over wholesalepurchases).The EnergyBill thus permitsboth self-dealingand self-selectionas betweenlevels of regula-tion.



12/14

71(3) Miller:PublicUtilityConcept 283cost as ceiling (for services to demand-in-elasticcustomers).Sucha system, t is main-tained, will prevent either predation orcross-subsidizationBaumoland Sidak1994,55-59, 63-64).The average ncremental ost of a serviceis identifiedas coveringonly the direct costof the service, ncludingservice pecific ixedcosts,but not anycontribution oward ixedcosts incurred n common or jointly for thespecific service or for other services sup-plied by the firm(Baumol and Sidak 1994,69). All other costs are to be absorbedbythe native load consumerbase. The stand-alone cost is further dentifiedas the highestprice it is possibleto chargein contestablemarkets (Baumol and Sidak 1994, 77-78).Needless to say,if the preceptsandassump-tions of contestability heory are incorrect,that price turns out to have few economiclimits and the processbecomes a matterofsauvequipeut-that is to say,pricing imitsare exclusivelypolitical.The proposal s advancedunder the ban-ner of economic efficiency.It is proposedalso in the name of accuracyand precision.However, as institutional economists longhave pointedout, cost allocation s not, andnor can it be, a preciseprocess.A consistenttheme running hroughout he institutional-ist literature s that of the essentialambigu-ity of costs (e.g., Commons [1924] 1959,208-13; Clark[1923]1981,35-69). When itcomes to the productionof multiple ser-vices, cost allocation is unavoidablyarbi-trary.The assignmentof costs thusbecomesa politicalrather hanan economicexercise,designed more as a tactical maneuver toachievestrategicobjectives han as a meansto achieveso-calledeconomicgoals such asParetooptimality.It shouldbe noted,moreover, hat as theimportanceof fixedto total costs increaseswith increased network development intelecommunications, ncrementalcosts willbe a decliningcomponentof the total, andas the importanceof joint to total costsincreases,the opportunity or the arbitraryexerciseof politicalpowerwillincrease.Thatis, adherence to mainstream costing andpricingprincipleswill result in the assign-ment of responsibilityfor an increasingly

smaller share of costs to the competitivesector, and the assignmentof an increas-ingly smaller share of the benefits of jointdevelopmentto the monopolysector. Thetelephone industryemphasizes ts need forpricing flexibility n the face of currenttechnological and economic turmoil. Thecoveted and much vaunted flexibility sdifficult to distinguish,however,fromplainold-fashionedmonopolypricing; hat is, theindisputably unscientific and inelegantchargingwhatthe trafficwill bear.At the same time, continuingrequire-ments such as that for high initial capitalinvestment,he existenceof substantial unkcosts,and the presenceof excesscapacitynmost public utilitymarketssignificantlyim-its potential entryinto monopolyand ancil-larymarkets, husstrictly imitingconsumeroptions.Thepoliticalagendaof the industrywould seem to be fulfilled.

V. CONCLUSIONThe publicutilityconceptis not obsolete.It is not obsolete because the conditionsthatgaveit life-the ability o extractexces-sive prices from captive consumers, thepresence of economies of scale and scope,high MEMS, high entry barriersensuringconcentrated markets-persist. Moreover,the public utility concept is not obsoletebecause, as institutional economists longhaverecognized,a public utility s not solelya business,withonly bottom ine businessintereststo advance.Publicutilitiesproducean essential publicserviceand operateun-der a unique public franchise.Such enter-prisessustain, n addition o privateprerog-atives, public interest franchiseobligationsto returnsomething o the community.As apracticalmatter,however, he application fthe public utility concept today is in jeop-ardy.In the United States where it was con-ceived,the publicutilityconceptand socialcontrolcharacteristicallyeceivedonlyhalf-hearted support. Competition was sanc-

tioned as the only appropriateregulator.Yet simultaneouslyt waswidelyrecognizedthat industriesclassified as public utilitiesare uniquely endowedwith characteristics



13/14

284 LandEconomics August1995that make faith in market control unten-able.Economists in the United States dis-playeda similar ambivalence.Although,ashas been noted, institutional economistsgenerallyendorsedregulationas necessaryfor the control of marketpower in publicutilitymarkets, here were manywithin theprofessionwho viewed any public policy,saveone that favored ree markets,an abdi-cation of professionalresponsibility.Therealso were economistsof varyingphilosophicpersuasionswho denied the effectivenessofeithercompetitionor regulationand soughtotheroptions.For example,althoughthe early ChicagoSchool economist Henry Simons was astaunchadvocateof competitionand calledfor its preservation hroughvigorous appli-cation of antitrust laws, he believed thatmarket orces had limitationswhen it cameto the control of publicutilities.In his view,however,regulationwas a flawedpublicpol-icy. He advocated public ownership andmanagementof publicutilities.In the caseof utilities,he acknowledged, competitionsimply cannot function effectively as anagencyof control Simons[1934]1948,51).A similarconclusionwas reachedby theinstitutionaleconomist Horace Gray who,in 1940, pronouncedregulation a failureand invokedthe celebrated passingof thepublic utilityconcept. He describedpublicutilityregulationas a policythatwhileorigi-nating as a means of social restraintandconsumerprotection,had becomea methodto protect monopolyproperty(Gray 1940,15-16), including immunityrom prosecu-tion under the anti-trust aws, . . . and,perhaps, most important, public accep-tanceandlegal recognitionof the economicfiction of 'natural'monopoly Gray 1940,11). Graycalledfor less relianceupon pri-vate enterpriseand more upon directgov-ernment action. Although examinationofall optionswas invited(Gray1940, 20), theimpression hat he found publicownershipthe most viable is difficultto avoid. It isinteresting o note that each of these earlyanalyses, animatedby opposing economicperspectives, considered the regulatorymodel inapplicable,but nonetheless did not

view competition as a reasonablealterna-tive. It should be reemphasized,however,that efforts of membersof the institutionalschool almost without exception were di-rected towardstrengtheningand improvingeconomic regulation (e.g., Bonbright andMeans [1932]1969,176-87 passim;Glaeser1957,3-13 passim;Trebing1987,passim).This diversityof opinion should be con-trasted with present day uniformity ofthought,dominatedas it is by a mainstreamthat demands deologicalpurityandinvokesonly variationsupon competitivesolutionsand cobbledtogethermarketmodelsto ad-dress these complex issues. Advocacy ofmarket control is transformed nto beliefthat publicintervention s the only impedi-ment to its emergence,or thatacting asifit existswill assureoptimalsolutions. Thuswe have a plethora of market and quasi-marketproposalstakingshape as contesta-bility, contract,bidding,and auction theo-ries proposedas cures for all economicills.Actual marketconditionsare deemedirrel-evant. It is important o understand,how-ever, that actual marketconditions ncludetechnical barriers o entrythat preventtheemergenceof competition.The centralpublicutilityissues have notchangedmaterially ince institutionalecon-omists initiallybegan their analyses shortlyafterthe turn of the twentiethcentury.Theyinvolve ssues of consumerexploitation ak-ing shape as market segmentation,cross-subsidization, nd discriminatoryricing;ofconcentration and the abuse of marketpower;of the abilityto limit marketentry.They involvealso questionsof how to pre-vent the milking f monopolyoperationsto cushioncompetitiveones and to supportextravagant construction and acquisitionprograms.That the problemsmaytake dif-ferent forms in differenteras is an indica-tion that regulationcontinuallymust be re-formulated o fit the problemat hand,andnot that it shouldbe eliminated.At bottom,while the form the public utility problemtakes may varyover time, its substancere-mains the same: that of the socialcontrol na public interest of the abuse of privatemarketpower.



14/14

71(3) Miller: ublicUtilityConcept 285References

Baumol, WilliamJ., and GregorySidak. 1994.TowardCompetitionn Local Telephony. am-bridge,MA and Washington,DC: The MITPress andThe AmericanEnterprise nstitutefor PublicPolicyResearch.Bonbright,James C., and GardinerC. Means.[1932]1969.TheHoldingCompany:ts PublicSignificance nd Its Regulation.Reprint,NewYork:AugustusM. Kelley.Carnevale,MaryLu. 1993. TelephoneServiceSeems on Brink of Huge Innovations. WallStreet ournal,February10.- . 1994. Long-Distance honeMeasure sCreatingSome Static. Wall StreetJournal,March16.Cauley, Leslie. 1993. BellSouthPlanningBigCharge,Layoffs. WallStreet ournal,Novem-ber 11.. 1994a. TwoBabyBells Move to OpenUp Local Monopolies. WallStreetJournal,February .. 1994b. FourBabyBells BeginBattletoEnd Consent Decree, Promising LowerRates. WallStreet ournal, uly7.. 1994c. Charge s Seen at Bell AtlanticAbove$3 Billion. WallStreetJournal,August15.Clark, J. Maurice. [1923] 1981. Studiesin theEconomics of Overhead Costs. Reprint,Chicago: University of Chicago MidwayReprints.Commons,John R. [1924]1959. LegalFounda-tions of Capitalism.Reprint, Madison:TheUniversityof WisconsinPress.Glaeser,MartinG. 1957.PublicUtilitiesnAmeri-can Capitalism.New York: The MacmillanCompany.Gray,Horace M. 1940. ThePassingof the Pub-lic UtilityConcept. ournal f Landand Pub-lic UtilityEconomics16 (Feb.):8-20.Keller,JohnJ. 1992. SomeAT&T ClientsGripeThat Cost Cuts Are HurtingService. WallStreet ournal, anuary24.. 1993. AT&T is TryingHard to Get aMajorRole in MultimediaFuture. WallStreetJournal,April22.. 1994. GTE to Trim 13%of Workers,Post Big Charge. WallStreetJournal, anuary14.

Miller,EdytheS. 1993. SomeMarketStructureandRegulatorymplications f the BraveNewWorld of Telecommunications. ournalofEconomic ssues 27 (Mar.):19-39.Pasztor,Andy,and Dave Kansas.1994. Regu-lators ProposeDirect CompetitionFor Pro-viding Electricityin California. WallStreetJournal,April21.

Selwyn,Lee L. 1992. ISDN'sProspectiveRolein The EvolvingPublicTelecommunicationsNetwork. Trends n Communicationsolicy17 (Dec.):12-17. (Boston: Economics andTechnology, nc.)-- . 1994. Market Failure in 'Open'

TelecommunicationsNetworks:Defining theNew 'Natural Monopoly'. UtilitiesPolicy 4(Jan.):21-30.Selwyn,Lee L.,and Dale N. Hatfield,et. al. 1994.The EnduringLocal Bottleneck:MonopolyPowerandthe LocalExchangeCarriers. oston/Boulder, CO: Economics and Technology,Inc./HatfieldAssociates,Inc.Selwyn,Lee L., and William P. Montgomery.1993. Patternsof Investmentby the RegionalBell HoldingCompanies.Boston: EconomicsandTechnology, nc.Simons,HenryC. [1934]1948. A PositivePro-gramfor LaissezFaire:SomeProposalsForaLiberalEconomicPolicy. n EconomicPolicyfor a FreeSociety.Reprint,Chicago:The Uni-versityof ChicagoPress.Trebing,HarryM. 1987. Regulation f Industry:An InstitutionalistApproach. ournal fEco-nomicIssues21 (Dec.):1707-38.. 1994. InstitutionalistContribution oPublicUtilityRegulation. n TheElgarCom-panion to Institutional nd Evolutionary co-

nomics,ed. G. M. Hodgson,W. J. Samuels,and M. R. Tool. Aldershot, England andBrookfield,VT: EdwardElgarPublishing,Ltd.Wartzman,Rick,and JohnHarwood.1994. WellConnected:For the BabyBells, GovernmentLobbyings HardlyChild'sPlay. WallStreetJournal,March15.Zeiger,Dinah. 1994. US West ServiceFailuresSpark Probe. Wall Street Journal, Sep-tember 8.

Documents

Is the Public Utility Concept Obsolete