dattier@jolnet.orpk.il.us (David Tamkin) (02/06/89)
Patrick Townson wrote about hearings regarding capping the rates telephone services charge instead of capping their markup percentages: |Now why do you suppose 'some' members of Congress would feel so strongly |against the plan? Perhaps some of you can tell me. If the regulated figure is the markup percentage, higher costs mean higher margins in proportion and thus higher profits. There is an incentive to incur higher costs, some of which are incurred in payment to companies that lobby Congress or in which legislators own stock. Capping the rates charged, however, gives cost-cutting as the sole means of increasing profits. If that goal appears too difficult and the legislator owns stock in the regulated company as well as under the circumstances I mentioned in the paragraph above, the legislator will have personal motives for favoring a markup percentage cap instead of a price cap. Here in Illinois, Central Telephone was unable to get approval for a cap on its rates to replace the current one on its percentage markup from the Illinois Commerce Commission. Yours cynically, David W. Tamkin dattier@jolnet.orpk.il.us ...!killer!jolnet!dattier