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6 Yale J. on Reg. 181 (1989)
How Natural Is Monopoly - The Case of Bypass in Natural Gas Distribution Markets

handle is hein.journals/yjor6 and id is 187 raw text is: How Natural Is Monopoly? The Case of Bypass in Natural Gas Distribution Markets Harry G. Broadmant Joseph P. Kalttt Public utility markets in the United States are commonly subject to both price and entry regulation. However, as dissatisfac- tion with much of the nation's regulatory system has mounted within the last decade, the wisdom of protecting utilities from competitors has come increasingly under attack.' Numerous court cases and administrative rulings by regulatory agencies,2 as well as developments in the economics literature,' have pointed to the benefits of allowing existing buyers of a utility's services to bypass the utility and transact for the services with either incumbent firms or new entrants.4 The issue of entry deregulation has been at the heart of debates over regulatory reform in such industries as telecommunications,5 cable and satellite television transmission, the postal service,7 and electricity generation.8 t Chief Economist, U.S. Senate Governmental Affairs Committee and Professorial Lecturer at the School of Advanced International Studies, Johns Hopkins University. When the research underlying this article was completed, Dr. Broadman was on the faculty at Harvard University, on leave from Resources for the Future. tt Professor of Political Economy, John F. Kennedy School of Government, Harvard University. This research was supported by Harvard University's Energy and Environmental Policy Center and by Resources for the Future. The views expressed herein are the authors' alone and should not be attributed to their respective institutions; nor do these views reflect any exercise of official legislative or regulatory responsibility. 1. For an excellent review of relevant literature, see Bailey & Baumol, Deregulation and the Theory of Contestable Markets, 1 YAix J. ON RFG. 111 (1984). 2. See infra Parts 1, II. 3. See infra Part III. 4. For a more general and formal definition of bypass, see infra Part III. 5. See, e.g., Copeland & Severn, Price Theory and Telecommunications Regulation: A Dissenting View, 3 Y.F. J. ON RE. 53, 74 (1985). 6. See, e.g., Owen, The Rise and Fall of Cable Television Regulation, in CAsE Sruwts IN REGUIA TION 86, 91-92 (L. Weiss & M. Klass eds. 1981). 7. See, e.g., Sherman, Pricing Policies of the U.S. Postal Service, in ReGULATxr.D INDUSTRIES AND PuBLi.c ENns.:iRisE: Eu~oXr.N AND UNtIEDa S'rrs PK.gslEsr1v 95 (B. Mitchell & P. Kleindorfer eds. 1980). 8. See, e.g., P. Jos~ow & R. SCo1MA.Ns E., MARKYrS FOR PowFR: AN ANALYSIS OF ELECrRIC U'ri.ry DF.RGUGIrON 22 (1983). Copyright 0 1989 by the Yale Journal on Regulation.

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