Regulation, Innovation, and the Introduction of New Telecommunications Services

Abstract

I examine the effects of FCC regulation on the innovation and introduction of advanced telecommunications services in the United States. An interim of lighter regulation provides an "experiment" to test the regulatory regime's impact. The econometric model comprises an arrival process (for service innovation) followed by a duration process (for regulatory delay). The number of services the firms created during the interim is 60%-99% higher than the model predicts they would have created if the stricter regulation had still been in place. Overall, firms would have introduced 62% more services to consumers during the study period if the regulation had not been in place. © 2002 President and Fellows of Harvard College and the Massachusetts Institute of Technology.