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Hastings Communications and Entertainment Law Journal

Abstract

This article provides an economic analysis and critique of imputation policies in telecommunications regulation. Imputation is a regulatory policy employed when a vertically integrated (i.e., end-to-end) regulated firm sells intermediate productive inputs in an "upstream" market to its own competitors in an end-user, or "downstream" market. The most common example of this regulatory policy is the imputations of access charges in state telecommunications regulation. It are used to guard against anticompetitive pricing practices and discriminatory pricing (i.e., price squeezes). This article uses regulatory and antitrust economics as well as antitrust case law to examine the efficacy of imputation policies. It concludes that an integrated firm has little or no incentive to engage in a true anticompetitive price squeeze, making the value of imputation policies questionable. Imputation policies could cause regulation-mandated price floors to be extraordinarily high, precluding legitimate competitive responses of vertically integrated local exchange carriers. Thus, imputation policies may do more to hamper true competition than to foster it, ultimately leading to the detriment of telecommunications service purchasers.

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