Telephone companies in paradise : a case study in telecommunications deregulation /

Mueller has written an excellent case study of Nebraska's experiment with giving local telephone companies nearly total rate flexibility. Beginning in 1987, Nebraska abandoned traditional rate of return and deregulated the rate charges for in-state toll calls. At the same time, basic local service provided by the telephone industry was protected from competition by alternative service providers. Mueller has prepared a carefully constructed comparative study of rates, revenues, expenses, modernization, and investment in Nebraska and four other midwestern states that continued to practice traditional rate of return regulation. Mueller found that after deregulation, Nebraska's telephone companies behaved no differently than their counterparts in the other states studied, and they continued to be conservatively managed. Despite being given total rate flexibility without the elimination of all regulatory barriers to competitive entry, Nebraska has not experienced major abuses of monopoly power. This last conclusion is especially interesting in light of the increase in technology-driven reductions in barriers to entry in traditional local telephone markets since Nebraska implemented rate flexibility. Advanced undergraduate through professional. S. Shapiro; University of New Haven