Alternative regulation and the efficiency of local exchange carriers: evidence from the Ameritech states

This paper examines growth in total factor productivity (TFP) before and after the implementation of alternative regulatory schemes for Ameritech operating companies. A model of TFP growth developed by the FCC is used. Results indicate that the introduction of price cap and incentive regulation leads to statistically significant increases in TFP growth. Results indicate that regulators may need to increase current productivity offsets to achieve a more equitable sharing of productivity gains between shareholders and ratepayers. (C) 1999 Elsevier Science Ltd. All rights reserved.