Bloch, Harry and Madden, Gary G and Coble-Neal, Grant (2001): The cost structure of Australian telecommunications. Published in: The Economic Record , Vol. 77, No. 239 (2001): pp. 338-350.
Download (421Kb) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||The cost structure of Australian telecommunications|
|Keywords:||Cost structure of Australian telecommunications|
|Subjects:||L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L96 - Telecommunications|
|Depositing User:||Gary G Madden|
|Date Deposited:||16. Oct 2008 01:42|
|Last Modified:||12. Feb 2013 10:25|
Albon, R., Hardin, A. and Dee, P. (1997), `Telecommunications Economics and Policy Issues', Industry Commission Staff Information Paper, AGPS, Canberra.
Baumol, W.J. (1977), `On the Proper Cost Tests for Natural Monopoly in a Multiproduct Industry', American Economic Review 67, 809-22.
Baumol, W.J. (1977) and Braunstein, Y.M. (1977), `Empirical Study of Scale Economies and Production Complementarity: The Case of Journal Publication', Journal of Political Economy 85, 1037-48.
Bernstein, J.I. (1988), `Multiple Outputs, Adjustment Costs and the Structure of Production', International Journal of Forecasting 4, 207-19.
Bernstein, J.I. (1989), `An Examination of the Equilibrium Specification and Structure of Production for Canadian Telecommunications', Journal of Applied Econometrics 4, 265-82.
Bloch, H., Madden, G. and Savage, S.J. (1998), `Cost Structure and Natural Monopoly: Issues for Australian Telecommunications', Paper presented at the 1998 Conference of Economists, University of Sydney, September 28-30.
Braunstein, Y.M. and Pulley, L.B. (1998), `Economies of Scale and Scope in Telephony: Applying the Composite Cost Function to Bell System Data', in D.M. Lamberton (ed.), Communication and Trade: Essays in Honor of Merhoo Jussawalla, Hampton Press, New Jersey, 181-92.
Bureau of Transport and Communications Economics (1995), Telecommunications in Australia Report 1987, AGPS, Canberra.
CEEM (2001), Australian Telecommunications Indicators, CERP, Curtin University of Technology, Perth, Western Australia.
Charnes, A., Cooper, W.W. and Sueyoshi, T. (1988), `A Goal Programming/Constrained Regression Review of the Bell System Breakup', Management Science 34, 1-26.
Christensen, L.R., Cummings, D. and Schoech, P.E. (1983), `Econometric Estimation of Scale Economies in Telecommunications', in L. Courville, A. de Fontenay and R. Dobell (eds), Economic Analysis of Telecommunications: Theory and Applications, Elsevier Science Publishers BV, Amsterdam, 27-54.
Diewert, W.E. and Wales, T.J. (1987), `Flexible Functional Forms and Global Curvature Conditions', Econometrica 55, 43-68.
Diewert, W.E. and Wales, T.J. (1991a), `Multiproduct Cost Function Estimation and Subadditivity Tests: A Critique of the Evans and Heckman Research on the U.S. Bell System', UBC Department of Economics Discussion Paper 91-21, 1-19.
Diewert, W.E. and Wales, T.J. (1991b), `On the Subadditivity of Telecommunications Cost Functions: Some Empirical Results for the U.S. and Japan', Department of Economics, University of British Columbia, Vancouver, Canada, Mimeo, May; submitted as evidence in the CRTC Interconnection Hearings (B.C. Tel (CRTC) 28 Dec90-2213 IC2 Attachment 2).
Diewert, W.E. and Wales, T.J. (1992), `Quadratic Spline Models for Producer's Supply and Demand Functions', International Economic Review 33, 705-22.
Evans, D.S. and Heckman, J.J. (1983), `Multiproduct Cost Function Estimates and Natural Monopoly Tests for the Bell System', in D.S. Evans (ed.), Breaking Up Bell: Essays on Industry Organization and Regulation, North-Holland, Amsterdam, 253-82.
Evans, D.S. and Heckman, J.J.(1984), `A Test for Subadditivity of the Cost Function with an Application to the Bell System', American Economic Review 74, 615-23.
Evans, D.S. and Heckman, J.J. (1986), `Erratum: A Test for Sub-additivity of the Cost Function with an Application to the Bell System', American Economic Review 76, 856-8.
Evans, D.S. and Heckman, J.J. (1988), `Natural Monopoly and the Bell System: Response to Charnes, Cooper and Sueyoshi', Management Science 34, 27-38.
Foreman, R.D. and Beauvais, E. (1999), `Scale Economies in Cellular Telephony: Size Matters', Journal of Regulatory Economics 16, 297^306.
Greenwald, B.C. and Sharkey, W.W. (1989), `The Economics of Deregulation of Local Exchange Telecommunications', Bellcore Economics Discussion Paper No. 56.
Guldmann, J.-M. (1990), `Economies of Scale and Density in Local Telephone Networks', Regional Science and Urban Economics 20, 521-35.
Heenan, G. (1989), `Regulation of the Australian Telecommunications Industry', Economic Papers 8, 65-73.
King, S.P. (1997), `National Competition Policy', Economic Record 73, 270-84.
Lopez, E. (1997), `The Structure of Production of the Spanish Telecommunications Sector', Empirical Economics 22, 321-30.
McKenzie, D.J. and Small, J.P. (1997), `Econometric Cost Structure Estimates for Cellular Telephony in the United States', Journal of Regulatory Economics 12, 147-57.
Maddock, R. (1999), `The Premature Burial of Telecommunications Reform: A Response to John Quiggin', Agenda 6, 39-46.
Post Master General's Department (1960), Annual Report.
Pulley, L.B. and Braunstein, Y.M. (1992), `A Composite Cost Function for Multiproduct Firms with an Application to Economies of Scope in Banking', Review of Economics and Statistics 74, 221-30.
Quiggin, J. (1998), `The Premature Burial of Natural Monopoly: Telecommunications Reforms in Australia', Agenda 5, 427-40.
Quiggin, J. (1999), `Rejoinder', Agenda 6, 47-50.
Röller, L.-H. (1990a), `Modelling Cost Structure: The Bell System Revisited', Applied Economics 22, 1661-74.
Röller, L.-H.(1990b), `Proper Quadratic Cost Functions with an Application to the Bell System', The Review of Economics and Statistics 72, 202-10.
Salvanes, K.G. and Tjøtta, S. (1998), `A Test for Natural Monopoly with Application to Norwegian Electricity Distribution', Review of Industrial Organization 13, 669-85.
Serafica, R.B. (1998), `An Economic Analysis of Pre-reform Philippine Telecoms', Telecommunications Policy 22, 359-70.
Shin, R.T. and Ying, J.S. (1992), `Unnatural Monopolies in Local Telephone', RAND Journal of Economics 23, 171-83.
Suits, D.B., Mason, A. and Chan, L. (1978), `Spline Functions Fitted by Standard Regression Methods', Review of Economics and Statistics 60, 132-9.
Sung, N. and Gort, M. (1997), `The Source of Natural Monopoly in the US Local Telephone Industry Telecommunications', in P. Enslow, P. Desrochers and I. Bonifacio (eds), 21st Century Communications Networks: Proceedings of the Global Networking 1997 Conference, IOC Press, Ohmsha, 156-64.
Zellner, A. (1962), `An Efficient Method of Estimating Seemingly Unrelated Regressions and Tests for Aggregation Bias', Journal of the American Statistical Association 57, 348-68.