Dean Foreman, Ph.D.

invited op-ed

invited op-ed

A considerable debate rages over what precipitated the recent wave of bankruptcies in the competitive US local telecommunications industry. Based on data from the optimistic period of 1999, this research demonstrates that traditional financial ratios concerning relative profitability, capital structure, and the power to finance growth internally almost completely explain which firms would fail within 2 years. Flawed business plans and poor execution are root causes. Measures of working capital… Show more

A considerable debate rages over what precipitated the recent wave of bankruptcies in the competitive US local telecommunications industry. Based on data from the optimistic period of 1999, this research demonstrates that traditional financial ratios concerning relative profitability, capital structure, and the power to finance growth internally almost completely explain which firms would fail within 2 years. Flawed business plans and poor execution are root causes. Measures of working capital correlate significantly and opposite to the direction typically found in the literature. Additionally, firms that rely heavily on uncertain legal and regulatory outcomes are significantly more likely to go bankrupt. Show less

This research uses web client automation to identify a large sample of residential facilities-based customers of competitive local exchange carriers (CLECs). The research examines demographics of the Census block groups where the identified customers live, and compares the profiles to the corresponding counties and states. As expected, the results suggest a community's proximity to business matters, and persons in Census block groups with residential facilities-based competition tend to have… Show more

This research uses web client automation to identify a large sample of residential facilities-based customers of competitive local exchange carriers (CLECs). The research examines demographics of the Census block groups where the identified customers live, and compares the profiles to the corresponding counties and states. As expected, the results suggest a community's proximity to business matters, and persons in Census block groups with residential facilities-based competition tend to have higher average income and educational achievement levels. Importantly, low-income households appear not to be left behind, which may speak to the efficacy of income-based support programs such as Lifeline and Link-Up. Show less

Strategic positioning and potential cost savings are popular explanations for growing consolidation in the wireless telephone industry. This research estimates economies of scale for a large panel of GTE Wireless cellular market areas. Contrary to previous findings, our results indicate scale economies exist throughout the system and provide a rationale for the industry trend of consolidation.

The links between incentive regulation and telco performance are complex. This survey of recent research briefly reviews empirical studies of the causes and effects of new regulatory initiatives to promote modernization, price reductions and cost containment. Given the importance of this topic, the strengths and limitations of the first generation quantitative studies need to be understood by policy-makers worldwide. After describing how new initiatives are attempting to improve… Show more

The links between incentive regulation and telco performance are complex. This survey of recent research briefly reviews empirical studies of the causes and effects of new regulatory initiatives to promote modernization, price reductions and cost containment. Given the importance of this topic, the strengths and limitations of the first generation quantitative studies need to be understood by policy-makers worldwide. After describing how new initiatives are attempting to improve telecommunications performance, we present some observations about the art of policy development. Show less

In many price-cap regulation plans, such as those of AT&T and British Telecom, a weighted average of the prices for multiple services (baskets) must not exceed a specified level. This analysis demonstrates that the weighting scheme most commonly employed is subject to intertemporal manipulation. This investigation provides specific demand conditions under which weight manipulation can arise, shows the manipulation to reduce social welfare, and proposes a simple alternative weighting scheme that… Show more

In many price-cap regulation plans, such as those of AT&T and British Telecom, a weighted average of the prices for multiple services (baskets) must not exceed a specified level. This analysis demonstrates that the weighting scheme most commonly employed is subject to intertemporal manipulation. This investigation provides specific demand conditions under which weight manipulation can arise, shows the manipulation to reduce social welfare, and proposes a simple alternative weighting scheme that is less prone to manipulation. The alternative weighting scheme can help in designing more effective price-cap plans, especially if new plans have longer terms than current ones. Show less

Price cap regulation is replacing traditional rate of return regulation in a number of jurisdictions. This development can be viewed as a regulatory mechanism facilitating the transition from monopoly to competitive markets. However, multiple goals cannot be achieved via a single instrument. Pure price caps have been modified to better meet the mix of regulatory objectives. These modifications further constrain incumbent telcos.