UMI MICROFILMED 1996 INFORMATION TO USERS This manuscript has been reproduced from the microfilm master. UMI films the text directly from the original or copy submitted. Thus, some thesis and dissertation copies are in typewriter face, while others may be from any type of computer printer. The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleedthrough, substandard margins, and improper alignment can adversely affect reproduction. In the unlikely event that the author did not send UMI a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note wilt indicate the deletion. Oversize materials (e.g., maps, drawings, charts) are reproduced by sectioning the original, beginning at the upper left-hand comer and continuing from left to right in equal sections with small overlaps. Bach original is also photographed in one exposure and is included in reduced form at the back of the book. Photographs included in the original manuscript have been reproduced xerographically in this copy. Higher quality 6" x 9" black and white photographic prints are available for any photographs or illustrations appearing in this copy for an additional charge. Contact UMI directly to order. UMI A Bell & Howell Information Company 300 North Zed> Road, Ann Aibor MI 48106-1346 USA 313/761-4700 800/321-0600 LESSONS FOR THE DESIGN OF INTERCONNECTION PRICING POLICY IN THE TELECOMMUNICATIONS INDUSTRY: A POLICY LEARNING APPROACH DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University By Hyon Kun Kwok, B.A., M.P.A. The Ohio State University 1996 Dissertation Committee: A. Desai R. W. Backoff Advisor D. N. Jones School of Public Policy and Management R. W. Lawton UMI Number: 9639276 UMI Microform 9639276 Copyright 1996, by UMI Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. UMI 300 North Zeeb Road Ann Arbor, MI 48103 Dedicated to my parents ACKNOWLEDGMENTS I express sincere appreciation to Dr. Anand Dcsai for his support, encouragement, and guidance throughout the research. Thanks also go to the other members of my advisory committee, Drs. Robert Backoff, Douglas Jones and Ray Lawton for their thoughtful insight and recommendations. Special appreciation goes to my parents for their endless support and encouragement. To my wife, Moonsun, I offer sincere thanks for your patience, understanding, encouragement and support. VITA May 24, 1962 Bom - Daejeon, South Korea 1985 B. A., Department of Public Administration, Yonsci University, South Korea 1987 M.P.A., School of Public Administration, The Ohio State University, Columbus, Ohio 1988 - 1992 Graduate research associate, School of Public Policy and Management, The Ohio State University, Columbus, Ohio 1991 - present Doctoral candidate, School of Public Policy and Management, The Ohio State University, Columbus, Ohio FIELDS OF STUDY Major Field: Public Policy and Management TABLE OF CONTENTS Pape Dedication ........................................................................................................................... ii Acknowledgment ............................................................................................................... iii V ita........................................................................................................................................ iv List of Tables ........................................................................................................................... ix List of Figures ....................................................................................................................... x Chapters: I. Introduction .................................................. I II. Research Framework and M ethods .................................................................................... 6 A. Lesson-Drawing Framework .................................................................................. 6 1. Lesson-Drawing os Policy Learning .........................................................6 2. Lesson-Drawing as Comparative Public Policy Research .....................II 3. Operationalization of Four Analytic Stages ............................................ 13 a. Anchoring.......................................................................................13 b. Modeling .......................................................................................17 c. Comparing Conceptual Model with Domestic Program and Prospective Evaluation ......................................................... 17 B. M ethods................................................................................................... 19 1. Method of Model Building ......................................................................19 a. Policy Design as Product: Structural Logic Analysis .................19 b. Incorporation of Knowledge Utilization Perspective in Structural A nalysis ................................................................................25 c. Policy Design as Process: Problem Structuring Analysis ____ 27 d. Post-hoc Rationale for Information Treatment Process and Literature Selection Criteria ................................................ 30 2. Method of Lesson-Drawing..................................................................... 38 v a. Lesson-Drawing Criteria ............................................................. 38 b. Case S tu d y .................................................................................... 40 III. Historical Review of Econoic Thought and Economic Regulation in the United States ..................................................................................................................................... 41 A. Introduction .................................... 41 B. Historical Review of Early Economic Thought and Emergence of Modem Economic Regulation in the U.S ................................................................... 46 1. Overview ................................................................................................... 46 2. Classical Economic Thought and Emergence of Neoclassical Econom ics.........................................................................................49 3. Emergence of Natural Monopoly and Destructive Competition Theories ............................................................................................................52 4. Potential Competition and Laissez-faire Policy Defense.......................57 5. "New School" Political Economists and Economic Regulation ..........59 C. Behavioral Assumptions of Economic Regulation from Three Economic Perspectives................................................................................................... 65 1. Behavioral Assumptions of Economic Regulation from Institutionalist Perspective.........................................................................................65 a. Origin of Institutional Economics .............................................. 65 (1) Thorstcin Vcblcn ...........................................................69 (2) John R. Commons .........................................................72 (3) Comparison between Thorstcin Vcblcn and John R. Com m ons................................................................. 78 b. Market Perception and Economic Regulation from Institutionalist Perspective .................................................. 79 2. Behavioral Assumptions of Economic Regulation (Antitrust Policy) from Structuralist Perspective .........................................................86 a. Origin of Structuralism in Industrial Organization ...................86 b. Market Perception and Economic Regulation (Antitrust) from Structuralist Perspective .......................................................95 3. Behavioral Assumptions of Economic Regulation from Neoclassical Economic Perspective ....................................................................102 a. Development of Neoclassical Economics ................................102 b. Market Perception and Economic Regulation (Antitrust) from Chicago School Perspective...............................................I ll D. Normative Assumptions of Economic Regulation from Three Economic Perspectives..................................................................................................119 1. Introduction ..............................................................................................119 2. Institutionalist Perspective: Direct Regulation (Direct Performance Control) ............................................................................................121 3. Structuralist Perspective: Antitrust (Indirect Performance Control) ........................................................................................................ 131 4. Neoclassical Economic Perspective: Deregulation (Market Autonomy and Application of Market R ule)..................................................140 E. Sum m ary .......................................................................................................... 150 IV. Theoretical Review of Industrial Structural Policies for Telecommunications Industry in the United States ................................................................................................155