Doctoral Dissertations

Yasuji Otsuka

Date of Award

8-1989

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Major

Economics

Major Professor

John W. Mayo

Committee Members

Bill Fox, Hui-Shyong Chang, Thomas P. Boehm

Abstract

Prior to the implementation of federally mandated rate-deregulation (Dec. 29, 1986) the cable television industry was under various types of regulation. State governments got involved with the industry along with local governments, and several different techniques were employed to regulate the industry, including: (1) local franchise regulation; (2) state public utility type regulation (rate base / rate-of-return regulation); (3) local regulation assisted by a state cable commission; (4) state common tariff regulation; and (5) state deregulation. The purpose of this work is to examine the effectiveness of these alternative types of regulation. Assuming that a regulatory commission seeks its own well-being by balancing possibly conflicting regulatory objectives, we may expect that the regulatory commission behaves differently under the alternative regulatory frameworks. Based on this, a series of implications for a typical regulatory commission's conduct can be obtained and compared with the observed behavior of regulated cable systems.

The results indicate that states that used rate base / rate-of-return regulation, preempting local governments' power to regulate the industry, were most effective in lowering rates for basic cable service, while cable systems in the states that chose the dual approach to regulate the industry (local regulation assisted by a state cable commission) were found to charge higher basic rates than cable systems under any other type of regulation. In terms of free public service and the quality of services, however, the latter was found to be most successful and cable systems under rate-of-return regulation were IV least effective in these areas. Overall, the series of implications for the behavior of regulatory commissions and regulated cable systems was proved. This implies that there is a link between the regulatory framework and the regulator's conduct, and consequently the regulated firm's behavior.

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