Entry and competition in the canadian telecommunications industry: The case of alberta government telephones
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This paper analyzes the problems arising from the introduction of competition into a publicly-owned, relatively small telecommunications carrier, Alberta Government Telephones (AGT), in the light of new empirical work. It addresses the issue of cost subadditivity by estimating AGT's multi-output, multi-input production structure. The hypothesis that AGT is a natural monopoly cannot be rejected. For the period examined, it is found that important cost savings are realized from the existence of a sole supplier in the provision of both local and toll calls. Had competition been allowed in AGT's market during the period examined (1974–85), its cost structure would have been adversely affected. However, it appears that these cost savings are decreasing as the pace of introduction of modern transmission and switching equipment is introduced in its network. These technological changes may eventually render competition viable.
KeywordsCost Saving International Economic Public Finance Technological Change Empirical Work
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