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The cost structure of Australian telecommunications

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  • Bloch, Harry
  • Madden, Gary G
  • Coble-Neal, Grant

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.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11019.

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Date of creation: 2001
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Publication status: Published in The Economic Record 239.77(2001): pp. 338-350
Handle: RePEc:pra:mprapa:11019

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  1. 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.
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  13. 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.
  14. 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.
  15. Lopez, Elena, 1997. "The Structure of Production of the Spanish Telecommunications Sector," Empirical Economics, Springer, vol. 22(3), pages 321-30.
  16. 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.
  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.
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Cited by:
  1. Anna Bottasso & Maurizio Conti, 2009. "Price cap regulation and the ratchet effect: a generalized index approach," Journal of Productivity Analysis, Springer, vol. 32(3), pages 191-201, December.

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