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Subsidies and distorted markets: Do telecom subsidies affect competition?

Author

Listed:
  • Eric Chiang

    (Department of Economics, College of Business, Florida Atlantic University)

  • Janice Hauge

    (University of North Texas)

  • Mark Jamison

    (University of Florida)

Abstract

There 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.

Suggested Citation

  • Eric Chiang & Janice Hauge & Mark Jamison, 2007. "Subsidies and distorted markets: Do telecom subsidies affect competition?," Working Papers 07002, Department of Economics, College of Business, Florida Atlantic University.
    • Handle: RePEc:fal:wpaper:07002
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    File URL: http://www.ericchiang.org/files/Chiang_Hauge_Jamison_JRE.pdf
    File Function: First version, 2007
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    References listed on IDEAS

    as
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    Cited by:

    1. Chiang, Eric P. & Hauge, Janice A., 2013. "The impact of non-neutral federal regulatory policy on competition," Telecommunications Policy, Elsevier, vol. 37(11), pages 1142-1149.
    2. Francesc Trillas, 2008. "Regulatory federalism in network industries," Working Papers 2008/8, Institut d'Economia de Barcelona (IEB).
    3. Casasbuenas, Jaime & de Oliveira, Fernando & Riobó, Alexander, 2014. "Effective subsidies to the demand for fixed broadbandwith an increase in penetration and an undistorted competition landscape: The Colombian case," 20th ITS Biennial Conference, Rio de Janeiro 2014: The Net and the Internet - Emerging Markets and Policies 106900, International Telecommunications Society (ITS).

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    More about this item

    Keywords

    subsidies; Universal Service Fund; telecommunications; regulation;
    All these keywords.

    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, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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