Subsidies and distorted markets: Do telecom subsidies affect competition?
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.
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| Length: | 37 pages |
| Date of creation: | Nov 2007 |
| Date of revision: | |
| Handle: | RePEc:fal:wpaper:07002 |
| Contact details of provider: | Postal: 777 Glades Road, Boca Raton, FL 33431 Phone: (561)-297-3220 Fax: (561)-297-2542 Web page: http://business.fau.edu/economics More information through EDIRC
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References listed on IDEAS
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- Eriksson, Ross C & Kaserman, David L & Mayo, John W, 1998. "Targeted and Untargeted Subsidy Schemes: Evidence from Postdivestiture Efforts to Promote Universal Telephone Service," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 477-502, October.
- Mario Denni & Harald Gruber, 2006. "The diffusion of broadband telecommunications: the role of competition," Departmental Working Papers of Economics - University 'Roma Tre' 0060, Department of Economics - University Roma Tre.
- Wolak, Frank A., 1996. "Can universal service survive in a competitive telecommunications environment? Evidence from the United States consumer expenditure survey," Information Economics and Policy, Elsevier, vol. 8(3), pages 163-203, September.
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