Deregulatory Takings and the Regulatory Contract: The Competitive Transformation of Network Industries in the United States

Author: J. Gregory Sidak
Published: January 1998
Publisher: Cambridge University Press
ISBN: 0521591597
Hardcover Book
Number of Pages: 653

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In this book J. Gregory Sidak and Daniel F. Spulber address deregulatory policies that threaten to reduce or destroy, without any offsetting payment of compensation, the value of private property in network industries. They term such policies "deregulatory takings." They further analyze the problem of the state's abrogation of its "regulatory contract" with private firms. They argue that constitutional projections of private property from takings, as well as efficient remedies for breach of contract, provide the proper foundation for the competitive transformation of network industries. Sidak and Spulber then derive the efficient price for the incumbent regulated firm to charge when the government compels it to sell access to its network to competitors. That price is the same price that emerges from application of takings jurisprudence and contract principles. Sidak and Spulber produce a comprehensive, coherent theory of "stranded costs," as well as a set of limiting principles for the payment of compensation when changes in government regulation upset settled expectations and harm private investors. Sidak and Spulber reaffirm the superiority of competition over regulation and, on the basis of their conclusions concerning efficient and compensatory pricing of network access, outline principles for deregulating network industries. This book makes basic theoretical contributions to both law and economics and has immediate relevance to policymakers involved in the competitive restructuring of the telecommunications and electric power industries in the United States and other countries.

Table of Contents
Preface
About the Authors
1 The Nature of the Controversy 1
2 Deregulation and Network Pricing 19
3 Quarantines and Quagmires 55
4 The Regulatory Contract 101
5 Remedies for Breach of the Regulatory Contract 179
6 Takings and the Property of the Regulated Utility 213
7 Just Compensation for Deregulatory Takings 273
8 The Efficient Component-Pricing Rule 283
9 The Market-Determined Efficient Component-Pricing Rule 307
10 Answering the Critics of Efficient Component Pricing 343
11 The Equivalence Principle 393
12 TSLRIC Pricing and the Fallacy of Forward-Looking Costs 403
13 Deregulatory Takings and Efficient Capital Markets 427
14 Limiting Principles for Stranded Cost Recovery 449
15 Deregulation and Managed Competition in Network Industries 495
16 The Tragedy of the Telecommons 535
References 565
Case Index 591
Name Index 609
Subject Index 617

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