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The Cost Structure of Australian Telecommunications

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Bloch, Harry, et al

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Abstract

Since 1991 Australian telecommunications has undergone substantial reform. To a large extent, the economic correctness of pro-competitive policy depends on the non-existence of natural monopoly technology. This paper provides estimates of the Australian telecommunications system cost structure, and tests for subadditivity from 1943 to 1991. Additivity of the cost function after 1945 rejects the natural monopoly hypothesis and supports recent government policy. Diminished natural monopoly characteristics suggest that co-ordination between firms through networking can achieve similar economies as internal co-ordination within a monopoly. This finding is important, given the trend towards network unbundling, and service provision through interconnection. Copyright 2001 by The Economic Society of Australia.

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Article provided by The Economic Society of Australia in its journal The Economic Record.

Volume (Year): 77 (2001)
Issue (Month): 239 (December)
Pages: 338-50
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Handle: RePEc:bla:ecorec:v:77:y:2001:i:239:p:338-50

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  1. McKenzie, David J & Small, John P, 1997. "Econometric Cost Structure Estimates for Cellular Telephony in the United States," Journal of Regulatory Economics, Springer, vol. 12(2), pages 147-57, September. [Downloadable!] (restricted)
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  3. Bernstein, Jeffrey I, 1989. "An Examination of the Equilibrium Specification and Structure of Production for Canadian Telecommunications," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(3), pages 265-82, July-Sept. [Downloadable!] (restricted)
    Other versions:
  4. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January. [Downloadable!] (restricted)
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  5. Foreman, R Dean & Beauvais, Edward, 1999. "Scale Economies in Cellular Telephony: Size Matters," Journal of Regulatory Economics, Springer, vol. 16(3), pages 297-306, November. [Downloadable!] (restricted)
  6. Bernstein, Jeffrey I., 1988. "Multiple outputs, adjustment costs and the structure of production for Bell Canada," International Journal of Forecasting, Elsevier, vol. 4(2), pages 207-219. [Downloadable!] (restricted)
  7. Evans, David S & Heckman, James J, 1984. "A Test for Subadditivity of the Cost Function with an Application to the Bell System," American Economic Review, American Economic Association, vol. 74(4), pages 615-23, September. [Downloadable!] (restricted)
  8. Baumol, William J, 1977. "On the Proper Cost Tests for Natural Monopoly in a Multiproduct Industry," American Economic Review, American Economic Association, vol. 67(5), pages 809-22, December. [Downloadable!] (restricted)
  9. Kjell G. Salvanes & Sigve Tjøtta, 1998. "A Test for Natural Monopoly with Application to Norwegian Electricity Distribution," Review of Industrial Organization, Springer, vol. 13(6), pages 669-685, December. [Downloadable!]
  10. Greenwald, Bruce C & Sharkey, William W, 1989. "The Economics of Deregulation of Local Exchange Telecommunications," Journal of Regulatory Economics, Springer, vol. 1(4), pages 319-39, December.
  11. Pulley, Lawrence B & Braunstein, Yale M, 1992. "A Composite Cost Function for Multiproduct Firms with an Application to Economies of Scope in Banking," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 221-30, May. [Downloadable!] (restricted)
  12. Suits, Daniel B & Mason, Andrew & Chan, Louis, 1978. "Spline Functions Fitted by Standard Regression Methods," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 132-39, February. [Downloadable!] (restricted)
  13. Lopez, Elena, 1997. "The Structure of Production of the Spanish Telecommunications Sector," Empirical Economics, Springer, vol. 22(3), pages 321-30.
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  16. Roller, Lars-Hendrik, 1990. "Proper Quadratic Cost Functions with an Application to the Bell System," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 202-10, May. [Downloadable!] (restricted)
  17. Richard T. Shin & John S. Ying, 1992. "Unnatural Monopolies in Local Telephone," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 171-183, Summer. [Downloadable!] (restricted)
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