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AB STRACT

This document is a report of work in progress toward evaluating effects of the recent decision of the Federal Communications Commission to oper public message services to competition. It is one product of the Regulatory Processes and Effects Project of the Center for Field Methods (ETIP). The broader project, described elsewhere, is attempting to analyze the effects of changes in regulatory processes on industrial innovation. The joint ET IP/FCC project will involve measuring whether the FCC policy change leads to increases in competition, technological innovation, and public benefit.

The first two chapters provide an introduction and snyopsis. Chapter III examines the setting in which the decision occurs in terms of historical developments, industry trends, and views held by various observers. Chapter IV describes the : Commission's mandate for regulation, process for implementing this mandate in terms of regulations and operations, and current industry status. The fifth chapter describes the evaluation logic. The last chapter is an assessment which shows that there are many choices to be made to target the evaluation. A glossary of terms and bibliography are included. Seven appendices are bound separately.

KEY WORDS: Administrative experimentation; Economic deregulation; Evaluability assessment; Evaluation; Experimental Technology Incentives Program: Federal Communications Commission; Regulatory experimentation; Regulatory policy; Technological innovation; Telecommunications.

ACKNOWLEDGEMENTS

This report could not have been completed without the assistance and cooperation of many people. First and foremost we would like to thank the Federal Communications Commission staff who provided invaluable information both about Commission operations and about issues that are currently being debated within the telecommunications industry. In particular, we wish to acknowledge:

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Frank Patella, Judy Nitsche, Ren Levy, and Daniel Harrold of
Tariff Review and Tariff Proceedings;

Jim Ferris, Complaints and Service Standards; and

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Robert James (Domestic Division) and Helene Bauman (International
Division) of the Facilities Branch.

We would especially like to thank Leonard Sawicki, Program Evaluation Branch, who provided assistance throughout the effort including reviews and comments on the preliminary drafts of this report.

Staff of both The Urban Institute and The Experimental Technology Incentives Program of the Department of Commerce participated on committees reviewing this report and offered advice during the course of research. We would like to thank Victor Berlin, Bud Libman, and Dan Fulmer of ETIP and Robert Sadacca, John Waller, Joe Nay, Lucile Graham, Michael Mulkey, Bill Foskett, Paul Nalley, John Heinberg, and Richard Schmidt of The Urban Institute.

Our initial contact with the industry produced a gratifying response. We would like to thank the common carriers which expressed interest in our experimental evaluation of the effects of changes in interstate telecommunications regulation. In some cases, carriers submitted information about their operations.

The telecommunications industry is indeed fast moving and complex. We found that the publication Telecommunications Reports provided valuable information about developments in the industry. Mr. Fred Henck, publisher of Reports, very kindly gave us permission to quote his journal.

We also appreciate the fine job done by Erica Sweeney who edited this report. Finally, we would like to thank the many people who helped to prepare the report. Staff who assisted us include: Kraig Jones, (Ms.) Mike Malone, Mary Sarley, John Fortunato-Schwandt, Ilona Bush, and Barbara Shunney. We are especially grateful to Copper Wilson who, in spite of coming to the project during the final report writing, took responsibility for primary secretarial support, worked long hours to meet deadlines, and also made valuable contributions to the content of the report.

James Bell
Sharon Kirby
Roland Weiss
Steven Watson

PREFACE

Regulatory agencies and regulatory reform are subjects of great interest today, and the effects of regulation on technological innovation and productivity in American industry are of special concern. Many reforms and changes in the regulatory process are being proposed, and some are being made. Each change represents an "experiment" in the operation of our society, even if no one carefully determines the result of that "experiment."

Since 1974, the Experimental Technology Incentives Program (ETIP)-located in the Center for Field Methods of the National Bureau of Standards-has pursued an understanding of the relationships between government policies and technology-based economic growth. This goal is based on three premises:

Technological change is a significant contributor to social and
economic development in the United States.

Federal, State, and local government policies can influence the
rate and direction of technological change.

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Current understanding of this influence and its impact on social
and economic factors is incomplete.

ET IP seeks to improve public policy and the policy research process in order to facilitate technological change in the private sector. The program does not pursue technological change per se. Rather, its mission is to examine and experiment with government policies and practices in order to identify and assist in the removal of government-related barriers and to correct inherent market imperfections that impede the innovation process.

ETIP assists other government agencies in the design and conduct of joint projects. Key agency decision makers are intimately involved in these experiments to ensure that the results are incorporated in the policymaking process. ETIP provides its agency partners with both analytical assistance and funding for the experiments while it oversees the evaluation function.

In 1977, The Urban Institute's Program Evaluation Group was awarded a significant contract ($856,000 over 15 months) as a result of competitive bidding on a U.S. Department of Commerce Request For Proposal. Under this contract the Program Evaluation Group provided analytic support and data collection services to ETIP. This work was the foundation for the Regulatory Processes and Effects Project (RPE). The Regulatory Processes and Effects Project, through this analytic support work, will analyze the process and

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