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Using Auctions to Jump-Start Competition and Short-Circuit Incumbent Market Power

Fortnightly Magazine - February 1 1999

for enactment as soon as possible, he added, "The message to the industry is that we're going to do this, so [stakeholders] better come to the table ready to seriously participate [in crafting the legislation]."

The Johnson-Mead proposal is based on recommendations issued in January 1998 by the Joint Select Committee on Electric Utility Deregulation, which the pair co-chair. Access the report at: www.state.oh.us/cons/pain.htm. Or, check the status of Ohio legislation at http://lsc.state.oh.us/ domino/lscstatus.nsf?open.

-RRJ

1 Zolnierek, James and Rangos, Katie, "Long Distance Market Shares, Third Quarter 1997," Federal Communications Commission, January 1998.

2 For views on the development of retail electric markets, see "California's Electric Market: What's in It for the Customer?" by Ryan Wiser, William Golove and Steve Pickle, Public Utilities Fortnightly, August 1998, p. 38; and "California's Electricity Market: Are Customers Necessary?" by Robert McCullough, Public Utilities Fortnightly, July 15, 1998, p. 36.

3 Another way of looking at market concentration is to consider the Herfindahl-Hirschman Index for the long-distance market. In 1984 the HHI (the sum of the squares of market shares for individual sellers) was 8,155 and dropped to 2,823 in 1996. At this level, even after this 12-year decline, some analysts are still concerned about market domination by AT&T.

4 See, e.g., "Winners' Curse: Why Spectrum Bidders Overpaid," by Stephen Maloney, Public Utilities Fortnightly, Oct. 15, 1997, p. 31.

5 In telecommunications, bid winners in spectrum auctions later proved unable to pay their bids. The auctions arguably changed the relationship between the FCC and the licensees it regulates. See "Spectrum Auctions at the FCC: A Lesson for Utilities?" by Shirley S. Fujimoto and Christine M. Gill, Public Utilities Fortnightly, Oct. 15, 1997, p. 26.

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