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Costly Gains to Breaking Up: LECs and the Baby Bells

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  • Ying, John S
  • Shin, Richard T

Abstract

While the divestiture of AT&T was intended to produce benefits in the long-distance market, the evidence suggests it has created an unexpected side benefit in local telephone markets. The authors' results show that local exchange carriers have realized immediate cost savings in responding to competitive pressures since the breakup, with the baby Bells experiencing generally larger gains. Dynamically, these productivity gains have increased over time at a relatively constant rate. Although gains of 3-5 percent of total cost are not that large, the absolutely large costs of telephone companies imply significant cost savings of nearly $72 million for the representative firm. Copyright 1993 by MIT Press.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 75 (1993)
Issue (Month): 2 (May)
Pages: 357-61

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Handle: RePEc:tpr:restat:v:75:y:1993:i:2:p:357-61

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. Luigi Benfratello & Alberto Iozzi & Paola Valbonesi, 2009. "Technology and incentive regulation in the Italian motorways industry," Journal of Regulatory Economics, Springer, Springer, vol. 35(2), pages 201-221, April.
  2. Noel Uri, 2002. "Assessing the Effect of Incentive Regulation on Productive Efficiency in Telecommunications in the United States," European Journal of Law and Economics, Springer, Springer, vol. 13(2), pages 113-127, March.
  3. Noel Uri & Florence Setzer, 2003. "Assessing the Performance of the Price Cap Plan for Local Exchange Carriers in the United States," European Journal of Law and Economics, Springer, Springer, vol. 15(3), pages 263-276, May.
  4. Noel Uri, 2001. "Productivity Change, Technical Progress, and Efficiency Improvement in Telecommunications," Review of Industrial Organization, Springer, Springer, vol. 18(3), pages 283-300, May.
  5. Luigi Benfratello & Alberto Iozzi & Paola Valbonesi, 2005. "Privatisation, regulation and productivity in the Italian motorway industry," "Marco Fanno" Working Papers, Dipartimento di Scienze Economiche "Marco Fanno" 0002, Dipartimento di Scienze Economiche "Marco Fanno".
  6. Marcelo Resende, 2006. "Efficiency Measurement and Regulation in U.S. Telecommunications: A Robustness Analysis," Economics Working Papers, European University Institute ECO2006/15, European University Institute.
  7. Noel Uri, 2003. "The Effect of Incentive Regulation in Telecommunications in the United States," Quality & Quantity: International Journal of Methodology, Springer, Springer, vol. 37(2), pages 169-191, May.
  8. Segendorff, Björn, 1995. "The Telecommunication Market: A Survey of Theory and Empirics," Working Paper Series, Research Institute of Industrial Economics 442, Research Institute of Industrial Economics.
  9. Uri, Noel D., 2003. "The adoption of incentive regulation and its effect on technical efficiency in telecommunications in the United States," International Journal of Production Economics, Elsevier, Elsevier, vol. 86(1), pages 21-34, October.
  10. Halkos, George & Tzeremes, Nickolaos, 2011. "A conditional full frontier approach for investigating the Averch-Johnson effect," MPRA Paper 35491, University Library of Munich, Germany.
  11. Noel Uri, 2001. "Telecommunications in the United States and Changing Productive Efficiency," Journal of Industry, Competition and Trade, Springer, Springer, vol. 1(3), pages 321-335, September.
  12. Resende, Marcelo, 1999. "Productivity growth and regulation in U.S. local telephony," Information Economics and Policy, Elsevier, Elsevier, vol. 11(1), pages 23-44, March.
  13. Lien, Donald & Peng, Yan, 2001. "Competition and production efficiency: Telecommunications in OECD countries," Information Economics and Policy, Elsevier, Elsevier, vol. 13(1), pages 51-76, March.
  14. Uri, Noel D., 2001. "The effect of incentive regulation on productive efficiency in telecommunications," Journal of Policy Modeling, Elsevier, Elsevier, vol. 23(8), pages 825-846, November.
  15. Uri, Noel D., 2001. "Technical efficiency, allocative efficiency, and the impact of incentive regulation in telecommunications in the United States," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 12(1), pages 59-73, March.
  16. Noel D. Uri, 2001. "Technical Efficiency, Allocative Efficiency, and the Implementation of a Price Cap Plan in Telecommunications in the United States," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 163-186, May.

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