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The Cost Structure of Australian Telecommunications

Author

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  • Harry Bloch
  • Gary Madden
  • Grant Coble‐Neal
  • Scott J. Savage

Abstract

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.

Suggested Citation

  • Harry Bloch & Gary Madden & Grant Coble‐Neal & Scott J. Savage, 2001. "The Cost Structure of Australian Telecommunications," The Economic Record, The Economic Society of Australia, vol. 77(239), pages 338-350, December.
    • Handle: RePEc:bla:ecorec:v:77:y:2001:i:239:p:338-350
    DOI: 10.1111/1475-4932.00027
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    1. Anna Bottasso & Maurizio Conti, 2009. "Price cap regulation and the ratchet effect: a generalized index approach," Journal of Productivity Analysis, Springer, vol. 32(3), pages 191-201, December.

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    JEL classification:

    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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