Is Regulation a Roadblock on the Information Highway?

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Author(s): James E. Prieger (Pepperdine University, USA)and Daniel Heil (Pepperdine University, USA)
Copyright: 2009
Pages: 18
Source title: Handbook of Research on Telecommunications Planning and Management for Business
Source Author(s)/Editor(s): In Lee (Western Illinois University, USA)
DOI: 10.4018/978-1-60566-194-0.ch002

Keywords: Information Science Reference / Media & Communications / Networking and Telecommunications / Telecommunications

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Abstract

Regulatory policy in telecommunications must balance short-term efficiency (low prices) against the firms’ incentives to innovate, which have longer reaching impacts on economic welfare. Historically, policy tended to sacrifice dynamic efficiency for the sake of competitive prices and static efficiency. In the last few decades, economists and other researchers have begun to document the large welfare costs of ignoring dynamic efficiency. We analyze the theoretical impact regulation has on innovation. We then turn to the empirical evidence that regulation dampens firms’ incentive to innovate in the telecommunications industry in general and the market for broadband Internet access in particular. Both product and process (cost reducing) innovation are discussed. The chapter forms a compendium of available research on the intersection of telecommunications regulation and innovation. We conclude with lessons the literature provides to policy makers and a discussion of future regulatory trends.

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Is Regulation a Roadblock on the Information Highway?

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