This study examines the effects of telecommunications regulations on California consumers and finds that government price controls are resulting in an annual decline in economic output equivalent to $120 per average household in California.

Regulations put in place by the 1996 Telecommunications Act permit competitive local exchange carriers (CLECs), such as AT&T, to rent the telephone facilities of incumbent local exchange carriers (ILECs), such as the Baby Bells, at very low government-set prices. While these low prices for parts of the telephone network, called "unbundled network elements" (UNEs1), appear to have encouraged CLECs to rent the ILECs' networks, they also appear to have discouraged industry investment by CLECs and ILECs. This study examines the costs and benefits of these price-setting regulations