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Competition in Payphones: State Regulations and Independent Providers' Shares

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Abstract

Independent payphone providers in 1995 held a 17.4 percent national share of payphones. Their shares and state regulators' policies vary greatly by state. We test the determinants of IPPs' shares in 1996, finding that they increase with the allowed local-call rate, with "dial-round compensation," and with the degree to which regulators have removed LEC competitors' incentives to carry inflated payphone investments. Weak evidence suggests that regulation of intrastate long-distance rates may help to solve the IPP's problem of committing not to overcharge. Under the Telecommunications Act of 1996, states' policy differences and interstate differences in IPPs' shares will likely narrow.

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Authors and Affiliations

  1. McKinsey and Co, 555 California Street, San Francisco, CA, 94109

    Amy Erenrich

  2. Harvard University, Cambridge, MA, 02138

    Richard E. Caves

Authors
  1. Amy Erenrich
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  2. Richard E. Caves
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Erenrich, A., Caves, R.E. Competition in Payphones: State Regulations and Independent Providers' Shares. Journal of Regulatory Economics 14, 265–280 (1998). https://doi.org/10.1023/A:1008083308012

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  • DOI: https://doi.org/10.1023/A:1008083308012

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