J Regul Econ https://doi.org/10.1007/s11149-018-9359-9 ORIGINAL ARTICLE Price competition in the market for business telecommunications services Gregory L. Rosston 1 · Scott J. Savage 2 · Bradley S. Wimmer 3 © Springer Science+Business Media, LLC, part of Springer Nature 2018 Abstract We estimate a two-step control-function model that relates incumbent prices for small-business telecommunications services to the number of facilities-based entrants, cost, demand, regulatory conditions, and a correction for endogenous market structure. Results show that the price effects from entry are understated in ordinary least squares regressions. When controlling for endogeneity, prices are negatively related to the number of entrants, indicating that markets without a competitive pres- ence could exhibit market power. These findings should prove helpful to the Federal Communications Commission and other State regulators determining the conditions under which price and other forms of regulation may be relaxed. Keywords Market power · Market structure · Prices · Telecommunications JEL Classification L1 · L13 · L96 We thank seminar participants at the WEAI Annual Conferences 2014 and 2016, the editor of this journal, and an anonymous referee for helpful comments. Xuyi Guo and Alex Stum provided excellent research assistance. The usual disclaimer applies. B Gregory L. Rosston grosston@stanford.edu Scott J. Savage scott.savage@colorado.edu Bradley S. Wimmer bradley.wimmer@unlv.edu 1 Stanford Institute for Economic Policy Research, Stanford, CA 94305-6015, USA 2 Department of Economics, University of Colorado, Boulder, CO 80309-0256, USA 3 Department of Economics, University of Nevada, Las Vegas, NV 89154-6005, USA 123