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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