ISBN:  Unavailable

Category: Unavailable

Page count: 166

This study presents the results of a test of the Averch and Johnson theory that a regulated public utility, under certain specified conditions, has an opportunity and an incentive to compete unfairly with its competitors in the supply of unregulated competitive services. The study investigates the profitability of three services offered by a Canadian telephone company. All three services are unregulated; two are competitive and the other a monopoly. Profitability is measured by the rate-of-return earned by the service and calculated by means of a long-run incremental model. Unfair competition is defined as the earning of a rate-of-return less than the company*s overall cost of capital. The results were not inconsistent with the Averch and Johnson theory. Two services earned a return greater than the cost of capital, and one (unregulated and competitive) generated a substantial loss thereby burdening other services of the company. Some of the implications of the results to both company management and the responsible regulatory agency are discussed.