J. Gregory Sidak

Bio: J. Gregory Sidak is an academic researcher from American Enterprise Institute. The author has contributed to research in topics: Cable television & Unbundling. The author has an hindex of 13, co-authored 27 publications receiving 750 citations. Previous affiliations of J. Gregory Sidak include Yale University & University of California, Berkeley.

Innovation, Investment and Unbundling

Abstract: In this Article, we examine the neglected tradeoff between innovation and mandatory unbundling of telecommunications networks. Our analysis is prompted by the Supreme Court's 1999 decision in AT&T Corp. v. Iowa Utilities Board and by the Federal Communications Commission's Second Further Notice of Proposed Rulemaking released later the same year, which address which network elements in the local telecommunications network shall be subject to compulsory sharing among competitors at regulated cost-based rates. Economic analysis indicates that mandatory unbundling at prices computed on the basis of the total element long-run incremental cost of the various network elements belonging to an incumbent local exchange carrier will adversely affect the ILEC's incentives not only to upgrade or maintain existing facilities, but also to invest in new facilities. Mandatory unbundling at TELRIC prices will also encourage competitive local exchange carriers to deviate from the socially optimal level of investment and entry. Finally, the confluence of mandatory unbundling and other FCC policies aggravates the distortion of investment decisions.

A Consumer-Welfare Approach to the Mandatory Unbundling of Telecommunications Networks

Abstract: In this Article, Professors Hausman and Sidak propose a consumer-welfare model for the mandatory unbundling of telecommunications networks. Their approach, responsive to both the Supreme Court's 1999 decision in AT&T Corp. v. Iowa Utilities Board and the Federal Communications Commission's Second Further Notice of Proposed Rulemaking later the same year, reconciles the necessary and impair standards of Statute 251(d)(2) of the Telecommunications Act with the economic analysis of antitrust law. The essential facilities doctrine in antitrust law provides four necessary, but not sufficient, conditions for finding impairment. The authors add a fifth condition, responsive to the explicit text of Statute 251(d)(2), which addresses whether an incumbent local exchange carrier could exercise market power over end-users by restricting competitors' access to a requested telecommunications network element in a particular geographical market. The authors also recommend that necessary be interpreted to mean that competition in end-user services would be impossible unless the requested element were unbundled at a cost-based regulated price. This heightened standard, they argue, will protect the economic incentives to create the intellectual property embodied in elements that are proprietary in nature. The authors' proposed interpretation of Statute 251(d)(2) focuses on the effectiveness of competition in the end-user services market, rather than on the ability of a particular competitor to earn profits. Thus, the test adopts consumer welfare, rather than competitor welfare, as its touchstone.

A Consumer-Welfare Approach to the Mandatory Unbundling of Telecommunications Networks

Abstract: In this Article, Professors Hausman and Sidak propose a consumer-welfare model for the mandatory unbundling of telecommunications networks. Their approach, responsive to both the Supreme Court's 1999 decision in AT&T Corp. v. Iowa Utilities Board and the Federal Communications Commission's Second Further Notice of Proposed Rulemaking later the same year, reconciles the necessary and impair standards of Statute 251(d)(2) of the Telecommunications Act with the economic analysis of antitrust law. The essential facilities doctrine in antitrust law provides four necessary, but not sufficient, conditions for finding impairment. The authors add a fifth condition, responsive to the explicit text of Statute 251(d)(2), which addresses whether an incumbent local exchange carrier could exercise market power over end-users by restricting competitors' access to a requested telecommunications network element in a particular geographical market. The authors also recommend that necessary be interpreted to mean that competition in end-user services would be impossible unless the requested element were unbundled at a cost-based regulated price. This heightened standard, they argue, will protect the economic incentives to create the intellectual property embodied in elements that are proprietary in nature. The authors' proposed interpretation of Statute 251(d)(2) focuses on the effectiveness of competition in the end-user services market, rather than on the ability of a particular competitor to earn profits. Thus, the test adopts consumer welfare, rather than competitor welfare, as its touchstone.

Cable Modems and DSL: Broadband Internet Access for Residential Customers

Abstract: To date, most residential customers to the Internet have used dial-up modems with a top speed of about 56.6 kbps [kilobits per second]. In the past two years broadband access has become available via cable modems offered by the local unregulated cable provider and via digital subscriber lines (DSL) offered by the local regulated telephone company (the incumbent local exchange carrier [ILEC]) and competitors who resell DSL using the ILEC facilities. Cable modems and DSL offer access speeds about 10-30 times higher than dial-up access and are termed broadband Internet access. Although Federal Communication Commission (FCC) regulation required ILEC's to sell the use of their facilities to competitors at below-cost prices, no regulation of cable companies has occurred. This outcome is curious given that cable companies have a significantly greater incentive to distort competition as a result of their unregulated monopoly profits from their cable operations. This asymmetric regulation by the FCC has led to the open-access debate. The open-access debate involves the question about whether the cable providers should be required to provide access to competing broadband Internet service providers (ISP's) or whether cable providers can use exclusive contract with their affiliated ISP's.Here, we consider the economic incentives and actions of the providers of broadband access with respect to limiting the usage of broadband access, including the potential competitive effects for cable television, a sector of the economy where, to date, system operators have been able to exercise significant market power. We answer the question of whether the price of narrowband Internet access constrains the price of broadband Internet access. We reject the hypothesis that the price of narrowband access does not affect the price of broadband access (transport) and ISP service is not rejected. Our finding is that lower narrowband access prices do not constrain the prices charged for broadband access.

Innovation, Investment, and Unbundling

Abstract: In this Article, we examine the neglected tradeoff between innovation and mandatory unbundling of telecommunications networks. Our analysis is prompted by the Supreme Court's 1999 decision in AT&T Corp. v. Iowa Utilities Board and by the Federal Communications Commission's Second Further Notice of Proposed Rulemaking released later the same year, which address which network elements in the local telecommunications network shall be subject to compulsory sharing among competitors at regulated cost-based rates. Economic analysis indicates that mandatory unbundling at prices computed on the basis of the total element long-run incremental cost of the various network elements belonging to an incumbent local exchange carrier will adversely affect the ILEC's incentives not only to upgrade or maintain existing facilities, but also to invest in new facilities. Mandatory unbundling at TELRIC prices will also encourage competitive local exchange carriers to deviate from the socially optimal level of investment and entry. Finally, the confluence of mandatory unbundling and other FCC policies aggravates the distortion of investment decisions.

The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research

Abstract: This paper discusses the empirical literature on the economic consequences of disclosure and financial reporting regulation, drawing on U.S. and international evidence. Given the policy relevance of research on regulation, we highlight the challenges with (1) quantifying regulatory costs and benefits, (2) measuring disclosure and reporting outcomes, and (3) drawing causal inferences from regulatory studies. Next, we discuss empirical studies that link disclosure and reporting activities to firm-specific and market-wide economic outcomes. Understanding these links is important when evaluating regulation. We then synthesize the empirical evidence on the economic effects of disclosure regulation and reporting standards, including the evidence on International Financial Reporting Standards (IFRS) adoption. Several important conclusions emerge. We generally lack evidence on market-wide effects and externalities from regulation, yet such evidence is central to the economic justification of regulation. Moreover, evidence on causal effects of disclosure and reporting regulation is still relatively rare. We also lack evidence on the real effects of such regulation. These limitations provide many research opportunities. We conclude with several specific suggestions for future research.

Economic Consequences of Financial Reporting and Disclosure Regulation: A Review and Suggestions for Future Research

Abstract: This paper surveys the theoretical and empirical literature on the economic consequences of financial reporting and disclosure regulation. We integrate theoretical and empirical studies from accounting, economics, finance and law in order to contribute to the cross-fertilization of these fields. We provide an organizing framework that identifies firm-specific (micro-level) and market-wide (macro-level) costs and benefits of firms‟ reporting and disclosure activities and then use this framework to discuss potential costs and benefits of regulating these activities and to organize the key insights from the literature. Our survey highlights important unanswered questions and concludes with numerous suggestions for future research.

Regulation and Investment

Abstract: use newly assembled data on regulation in several sectors of many OECD countries to provide evidence that regulatory reform of product markets is associated with an increase in investment. A component of reform that plays a very important role is entry liberalization, but privatization also has a substantial effect on investment. Sensitivity analysis suggests that our results are robust. (JEL: E22, L5)

E-ztax: Tax Salience and Tax Rates

Abstract: This paper examines whether the salience of a tax system affects equilibrium tax rates. I analyze how tolls change after toll facilities adopt electronic toll collection (ETC); drivers are substantially less aware of tolls paid electronically. I estimate that, in steady state, tolls are 20 to 40 percent higher than they would have been without ETC. Consistent with a salience-based explanation for this toll increase, I find that under ETC, driving becomes less elastic with respect to the toll and toll setting becomes less sensitive to the electoral calendar. Alternative explanations appear unlikely to be able to explain the findings.

Recent developments in the theory of regulation

Abstract: This chapter reviews recent theoretical work on the design of regulatory policy, focusing on the complications that arise when regulated suppliers have better information about the regulated industry than do regulators. The discussion begins by characterizing the optimal regulation of a monopoly supplier that is better informed than the regulator about its production cost and/or consumer demand for its product. Both adverse selection (“hidden information”) and moral hazard (“hidden action”) complications are considered, as are the additional concerns that arise when the regulator's intertemporal commitment powers are limited. The chapter then analyzes the design of practical policies, such as price cap regulation, that are often observed in practice. The design of regulatory policy in the presence of limited competitive forces also is reviewed. Yardstick regulation, procedures for awarding monopoly franchises, and optimal industry structuring are analyzed. The chapter also analyzes the optimal pricing of access to bottleneck production facilities in vertically-related industries, stressing the complications that arise when the owner of the bottleneck facility also operates as a retail producer.