| The telecommunications industry has been affected by innovation and technological changes. Technological changes combined with judicial rulings and policy changes have led to a radical restructuring of the industry. The effects of restructuring on the firms, the consumers, and the role of regulators are currently unclear. A resulting question is "how are changes in state regulatory policies affecting local exchange carrier infrastructure investment?" I answer this by examining investment in four new technologies as they are affected by the regulatory policies.;The industry operated for decades as a regulated monopoly. As competition, albeit regulated, develops within the industry it is important to analyze the effects of changing or eliminating regulations. Competition in telecommunications affects the regulatory environment, which in turn affects the industry's structure and its competitiveness. Under more competitive conditions, the operating companies and state commissions are pursuing further changes in the environment, which affects how firms invest in new technologies.;Changes in the industry are, in part, affected by the advent and adoption of new technologies. Fiber optics and digital technology have been important developments in telecommunications, allowing for dramatic increases in system capabilities, products, and services. Deployment of new technology is undertaken mainly by local exchange carriers, who are limited by the regulatory structure at both the federal and state levels. Many factors affect demand for new technologies, including prices, the firms' characteristics, and characteristics of the state. In order to ascertain which factors are influential, and thus should be considered by policy makers, I analyze the decisions to deploy new technologies. For the study, I collected company specific data on fiber optic cable, DSPC switches, lines with potential access to ISDN, switches equipped with SS7, wages, regulatory characteristics, population, income, and earnings. Using this data, I perform an analysis on the effects of changing regulations on the adoption of new technology.;I clarify some issues by examining how investment by local exchange carriers in new technology responded to different cross-sectional and over-time revisions in regulatory policy. The results show that regulatory policies matter in the investment decisions. As firms are placed in more competitive environments, they invest more competitively, maximizing profits. The results regarding the effects of regulatory policy changes are important in the development of telecommunications policy, within each state and for the United States. |
