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Auctions for Universal Service Subsidies

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  • Sorana, Valter

Abstract

The Telecommunications Act of 1996 requires that telephone service be available in high-cost areas at rates that are "affordable" and "reasonably comparable" to those charged in low-cost areas. It also requires that carriers serving high-cost areas at below-cost rates be compensated with explicit and sufficient subsidies. This paper analyzes an auction mechanism for the allocation of such subsidies. It shows that in a wide range of circumstances auctions are more efficient than traditional subsidy schemes. It also shows, however, that auction designs aimed at stimulating competition among several subsidized carriers may be particularly vulnerable to collusion. Copyright 2000 by Kluwer Academic Publishers

Suggested Citation

  • Sorana, Valter, 2000. "Auctions for Universal Service Subsidies," Journal of Regulatory Economics, Springer, vol. 18(1), pages 33-58, July.
    • Handle: RePEc:kap:regeco:v:18:y:2000:i:1:p:33-58
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    Citations

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    Cited by:

    1. Ilie, Laura & Losada, Ramiro, 2004. "Endogenous financing of the universal service," UC3M Working papers. Economics we044116, Universidad Carlos III de Madrid. Departamento de Economía.
    2. Philippe Jehiel & Benny Moldovanu, 2005. "Allocative and Informational Externalities in Auctions and Related Mechanisms," Levine's Bibliography 784828000000000490, UCLA Department of Economics.
    3. Birke, Franziska, 2007. "Universaldienstregulierung in der Telekommunikation heute: Herausforderungen, Chancen und Risiken ; ein historischer Ansatz," Discussion Papers 114, University of Freiburg, Institute for Transport Economics and Regional Policy.
    4. Gunnar ALEXANDERSSON & Staffan HULTÉN, 2007. "High And Low Bids In Tenders: Strategic Pricing And Other Bidding Behaviour In Public Tenders Of Passenger Railway Services," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(2), pages 161-194, June.
    5. Hultkrantz, Lars, 2005. "A review of universal-service policy," Working Papers 2005:5, Örebro University, School of Business.
    6. Joan Calzada & Christian Jaag & Urs Trinkner, 2010. "Universal service auctions in liberalized postal markets," Chapters, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Heightening Competition in the Postal and Delivery Sector, chapter 17, Edward Elgar Publishing.
    7. Gunnar Alexandersson & Staffan Hultén, 2006. "Predatory bidding in competitive tenders: A Swedish case study," European Journal of Law and Economics, Springer, vol. 22(1), pages 73-94, July.
    8. Andrés Gomez-Lobo & Marcela Meléndez, 2006. "La política social de las telecomunicaciones en Colombia," Cuadernos de Fedesarrollo 12707, Fedesarrollo.
    9. Joan Calzada & Xavier Fageda, 2012. "Discounts and Public Service Obligations in the Airline Market: Lessons from Spain," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(4), pages 291-312, June.
    10. Antonio Estache & L. Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES 2008_018, ULB -- Universite Libre de Bruxelles.

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