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The implications of economic efficiency for US telecommunications policy

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  • Wenders, John T.
  • Egan, Bruce L.

Abstract

Subsidizing local residence telecommunications service from toll services has produced large distortions in US state and interstate toll markets. While both the business and residence groups as a whole would benefit from lower toll prices and higher residence prices, the fact that toll usage is concentrated means that most residence subscribers would be made worse off. It is therefore politically difficult to implement efficient telecommunications pricing. However, this same concentration of toll usage makes it advantageous for large toll users to bypass the local network to escape the subsidy-laden carrier access charges. Such a bifurcation of the telecommunications network has the potential for making most residence subscribers even worse off than they would be under an efficiency- enhancing reduction in toll prices.

Suggested Citation

  • Wenders, John T. & Egan, Bruce L., 1986. "The implications of economic efficiency for US telecommunications policy," Telecommunications Policy, Elsevier, vol. 10(1), pages 33-40, March.
    • Handle: RePEc:eee:telpol:v:10:y:1986:i:1:p:33-40
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    Citations

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    Cited by:

    1. Robert W. Crandall, 1991. "LIBERALIZATION WITHOUT DEREGULATION: U.S. TELECOMMUNICATIONS POLICY DURING THE 1980s," Contemporary Economic Policy, Western Economic Association International, vol. 9(4), pages 70-81, October.
    2. Foreman-Peck, James, 1989. "Ownership, Competition And Productivity Growth: The Impact Of Liberalisation And Privatisation Upon British Telecom," Economic Research Papers 268372, University of Warwick - Department of Economics.
    3. David Encaoua & Michel Moreaux, 1987. "L'analyse théorique des problèmes de tarification et d'allocation des coûts dans les télécommunications," Revue Économique, Programme National Persée, vol. 38(2), pages 375-414.
    4. Quiggin, John, 1997. "Efficiency versus social optimality: The case of telecommunications pricing," Information Economics and Policy, Elsevier, vol. 9(4), pages 291-308, December.
    5. Robert Albon, 1988. "The Welfare Costs of the Australian Telecommunications Pricing Structure," The Economic Record, The Economic Society of Australia, vol. 64(2), pages 102-112, June.

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