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| Author: | Wilson, W. W. Zhou, Y. |
| Title: | Telecommunications deregulation and subadditive costs: Are local telephone monopolies unnatural? |
| Journal: | International Journal of Industrial Organization
2001 : MAY, VOL. 19:6, p. 909-930 |
| Index terms: | TELECOMMUNICATIONS INDUSTRY COSTS MONOPOLY |
| Language: | eng |
| Abstract: | In early 1996, Congress passed the Telecommunications Law, providing the foundation for the opening of regulated local telephone monopolies to competition. One important premise for introducing competition into local telephone markets is that these markets are not (or are no longer) natural monopolies. This paper reexamines the natural monopoly issue using a cost function that controls for firm heterogeneity. The authors' subadditivity tests suggest that Local Exchange Carriers' (LECs) costs are subadditive when there are controls for unobserved heterogeneity, suggesting that local telephone markets are natural monopoly markets. The paper provides a substantial list of references on this subject. |
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