The structure of cost and demand in the United States telecommunications industry.

Abstract

This dissertation provides an analysis of cost and demand structures in the U.S. telecommunications industry from 1960--1999. The research is primarily concerned with the effects of deregulation, competition and technology on the structures of cost and demand on the cost and demand structures. Short and long run industry models are estimated with non-linear three-state least squares regression techniques. The analysis provides information about telecommunications economies of scale, capital investment, and cross subsidization. Evidence indicates strong economies of scale in the last fifteen years of the sample. These scale economies may be attributable to an unprecedented increase in general R&D investment, significant investments in fiber optic technology and recent mergers and acquisitions among telecommunications companies. Empirical results also indicate efficiency gains from deregulation and competition in toll and local markets. Based upon these findings, several policy recommendations are offered. In general, these proposals are designed to increase competition, speed technology deployment, promote investment and prevent inefficient mergers in the U.S. telecommunications industry.