I wrote the other day about how Kevin Drum was confused at why broadband stocks might be rising in the wake of news that the government would regulate broadband companies as utilities. I argued the reason was likely because investors know that such regulation blocks most innovation-based competition and tends to guarantee companies a minimum profit -- nothing to sneeze at in the Internet world where previous giants like AOL, Earthlink, and Mindspring are mostly toast.
James Taranto pointed today to an interesting Richard Eptstein quote along the same lines (though he was referring to hospitals under Obamacare):
Traditional public utility regulation applies to such services as gas, electric and water, which were supplied by natural monopolists. Left unregulated, they could charge excessive or discriminatory prices. The constitutional art of rate regulation sought to keep monopolists at competitive rates of return.
To control against the risk of confiscatory rates, the Supreme Court also required the state regulator to allow each firm to obtain a market rate of return on its invested capital, taking into account the inherent riskiness of the venture.