Former Carter ICC Chairman Darius Gaskins had a portentous tale today about the political forces behind the Staggers Act railroad deregulation. Mr. Gaskins recounted how, with the Staggers Act, the railroads pushed for deregulation thinking it would give them the ability to raise prices and escape their slow inevitable march toward bankruptcy under price regulation. In contrast, the shippers argued against price deregulation, fearing that the price-deregulated railroads would raise prices with impunity.
What happened post-deregulation? Rail shipping prices dropped at the fastest rate in the industry's history. Shippers benefited immeasurably from the end of economic regulation; railroads were forced to compete even more ferociously to stay alive against the competition from trucking, air cargo and other railroads.
History is poised to repeat itself in communications. The end of economic regulation, I predict, will bring declining prices (excepting, of course, those prices that are already below cost). The economics of VoIP utterly eviscerate and pricing power a company might have or hope to have. When companies are replacing $10 million circuit switches with $10,000 IP-routers, you know the economics of the industry have changed.