Subsidies and distorted markets: Do telecom subsidies affect competition?
AbstractThere is general concern that producer subsidies distort competition. We examine a telecommunications subsidy system that transfers money from low cost regions to high cost regions of the U.S. Even though the system is designed to be competitively neutral, we find evidence that the system, combined with carrier of last resort policies, promotes cream skimming by entrants in low cost areas and deters entry in high cost areas, where incumbents are more likely than entrants to receive subsidies. We are unable to rule out the possibility that state regulatory policies favor incumbents in states that are net beneficiaries of the subsidy system.
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Bibliographic InfoPaper provided by Department of Economics, College of Business, Florida Atlantic University in its series Working Papers with number 07002.
Length: 37 pages
Date of creation: Nov 2007
Date of revision:
subsidies; Universal Service Fund; telecommunications; regulation;
Find related papers by JEL classification:
- L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-01 (All new papers)
- NEP-COM-2007-12-01 (Industrial Competition)
- NEP-MIC-2007-12-01 (Microeconomics)
- NEP-REG-2007-12-01 (Regulation)
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