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The Cost Structure of Australian Telecommunications

  • Bloch, Harry, et al

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. 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.
  2. Bernstein, Jeffrey I., 1987. "An Examination of the Equilibrium Specification and Structure of Production for Canadian Telecommunications," Working Papers 87-21, C.V. Starr Center for Applied Economics, New York University.
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  15. W. Erwin Diewert & T.J. Wales, 1989. "Flexible Functional Forms and Global Curvature Conditions," NBER Technical Working Papers 0040, National Bureau of Economic Research, Inc.
  16. 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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