Telecommunications regulation and new services: A case study at the state level

This study introduces methodology to quantify the effects that regulation has on the innovation and the introduction of new products, and compares state-regulated services in Indiana under rate of return regulation (RoRR) and under alternative regulation. The econometric model comprises a count process (for innovation) followed by a duration process with selection (for regulatory delay). When the firm is released from RoRR, the rate of service creation triples and expected approval delays nearly disappear. The firm may have introduced up to 12 times as many services to consumers if the alternative regulation had been in place the entire time.