Ellig Econ Deregulation In Network Industries Dec 2005

Economic Deregulation in Network Industries: The “First Wave” Jerry Ellig Senior Research Fellow [email_address]

Outline ,[object Object],[object Object],[object Object]

Why does this matter? ,[object Object],[object Object],[object Object]

Network Industries Local streets Highways Trucks Airports Airways/ air traffic control Airlines Wireline local Wireline long-distance Telecom equipment Local lines/ sidings Trunk lines Trains Local pipes Interstate pipes Gas wells “ Distribution” “ Transmission” “ Production”

Largely Private Ownership (blue) Local streets Highways Trucks Airports Air traffic control Airlines Wireline local Wireline long-distance Telecom equipment Local lines/ sidings Trunk lines Trains Local pipes Interstate pipes Gas wells “ Distribution” “ Transmission” “ Production”

Deregulation of Prices and Entry Govt owned Govt owned 1980 Trucking Govt owned Govt owned 1978 Airlines 1996- ongoing Late 1970s-early 1990s 1970s Wireline Telecom 1976-1980 1976-1980 1976-1980 Rail None Some entry mid-1980s 1978-1993 Gas “ Distribution” “ Transmission” “ Production”

“Open” or “Competitive” Access Govt owned Govt owned N.A. Trucking Govt owned Govt owned N.A. Airlines 1984-today AT&T resale 1984 N.A. Wireline Telecom Mergers 1980-today Mergers 1980-today N.A. Rail State-specific 1983-1992 N.A. Gas “ Distribution” “ Transmission” “ Production”

% Real Price Reduction After … 28-58% (1977-87) 3-17% (1980-85) N.A. Trucking 29% (1977-87) 12% (1977-82) 13% (1977-79) Airlines 40-47% (1984-94) 23-41% (1984-89) 5-16% (1984-86) Long-Distance Telecom 44% (1980-90) 20% (1980-85) 4% (1980-82) Rail 27-57% (1984-94) 23-45% (1984-89) 10-38% (1984-86) Gas 10 years 5 years 2 years

Annual Value of Consumer Benefits ($1995) $4.2 billion $19.6 billion Trucking $7 billion $19.4 billion Airlines N.A. $5 billion Long-Distance Telecom $4.7 billion $9.1 billion Rail N.A. $4-7 billion? Gas Nonprice Total

Hypotheses ,[object Object],[object Object],[object Object],[object Object]

Gas Price Regulation as a “Windfall Profits” Tax (1968-77) ,[object Object],[object Object],[object Object]

All Consumers’ Gas Prices Fell

Cost Reductions in Gas Transmission

Gas Innovations ,[object Object],[object Object],[object Object],[object Object]

Rail Productivity Improvements

Rail Innovations ,[object Object],[object Object],[object Object],[object Object],[object Object]

Rail Predictions vs. Actual ,[object Object],[object Object],[object Object],[object Object],[object Object]

Long-Distance Telecom Innovations ,[object Object],[object Object],[object Object]

Airline Innovations ,[object Object],[object Object],[object Object],[object Object]

Trucking Innovations ,[object Object],[object Object],[object Object],[object Object]

Conclusion ,[object Object],[object Object]

Caveats ,[object Object],[object Object],[object Object],[object Object],[object Object]

For more information … ,[object Object],[object Object],[object Object],[object Object]

Ellig Econ Deregulation In Network Industries Dec 2005

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