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Cost Proxy Models and Telecommunications Policy : A New Empirical Approach to Regulation - Farid Gasmi

Cost Proxy Models and Telecommunications Policy

A New Empirical Approach to Regulation

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The telecommunications industry defies easy characterization. The long-distance sector is highly competitive and the local exchange sector much less so, while digital transmission and switching have blurred the distinction between traditional voice communication and the transmission of video and data messages. Regulation of this industry has generally been considered necessary because it has aspects of a natural monopoly.This book takes an empirical approach to natural monopoly and the need for regulation of telecommunications. The centerpiece of the analysis is a sophisticated engineering cost proxy model, the local exchange cost optimization model (LECOM). The book, which is largely methodological, shows that a combination of LECOM, econometrics, and simulations can aid policy discussion of such contentious issues as incentive regulation, natural monopolies, estimating the cost of interconnection among networks, and the obligation of universal service. The book presents a theoretical framework to explain the incentives of firms and the power of regulation and then uses LECOM to test the theoretical implications. The work is unusual in that it applies the foundations of regulation theory to a model of an industry rather than applying econometric theory to historical cost data. The book includes a CD-ROM containing the data set the authors used to analyze their model.

Industry Reviews

"This book is an important tool for regulators and policy analysts interested in implementing sound policies for the regulation of imperfect competition in local monopoly services and for instituting universal service programs. The theoretical rationales expose many of the problems with historic regulatory and subsidy programs and set a framework for implementing efficient forward-looking solutions. In addition, it provides a promising new avenue for ways to do empirical economic research."--Gregory L. Rosston, Deputy Director, Stanford Institute for Economic Policy Research, Stanford University "The answer to virtually every important question in the field of empirical regulation depends on estimates of the firm's cost function--estimates that have been notoriously poor in past telecommunications studies. The authors' cost proxy model approach, enabling a unified empirical study of natural monopoly, universal service, and optimal regulation, takes a giant step toward a New Empirical Regulatory Economics."--James E. Prieger, Department of Economics, University of California Davis

Series Foreword
Introductionp. 1
The Local Exchange Cost Optimization Model (LECOM)p. 15
The Use of LECOM under Complete Informationp. 37
Regulation under Incomplete Informationp. 51
The Natural Monopoly Testp. 65
Optimal Regulation of a Natural Monopolyp. 91
Comparison of Performance of Incentive and Traditional Regulatory Schemesp. 113
Universal Servicep. 133
Strategic Cross-subsidies and Vertical Integrationp. 153
Conclusionp. 177
App. Ap. 189
App. Bp. 211
Notesp. 223
Referencesp. 243
Indexp. 249
Table of Contents provided by Blackwell. All Rights Reserved.

ISBN: 9780262072373
ISBN-10: 0262072378
Series: Regulation of Economic Activity
Audience: Professional
For Ages: 18+ years old
Format: Hardcover
Language: English
Number Of Pages: 274
Published: 13th September 2002
Country of Publication: US
Dimensions (cm): 22.9 x 15.2  x 2.5
Weight (kg): 0.54