Incentive Regulation and Telecommunications Service Quality

We examine the impact of incentive regulation—price regulation and earnings sharing regulation—on retail service quality in the U.S. telecommunications industry between 1991 and 2002. We find that incentive regulation is associated with significantly higher service quality on several dimensions (e.g., more rapid installation of new telephone service, fewer trouble reports, and increased customer satisfaction) but significantly lower quality on some dimensions (fewer installation commitments met and longer delays in resolving reported service problems)JEL Classification: L51, L96, L15We thank Michael Crew and two anonymous referees for helpful comments and suggestions. We are also grateful to Vanessa Cruz and Mircea Marcu for excellent research assistance.