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No. 501: Natural or Unnatural Monopolies in UK Telecommunications?

Lisa Correa , Queen Mary, University of London

September 1, 2003

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Abstract

This paper analyses whether scale economies exists in the UK telecommunications industry. The approach employed differs from other UK studies in that panel data for a range of companies is used. This increases the number of observations and thus allows potentially for more robust tests for global subadditivity of the cost function. The main findings from the study reveal that although the results need to be treated with some caution allowing/encouraging infrastructure competition in the local loop may result in substantial cost savings.

J.E.L classification codes: D42, L11, L12, L51, L96

Keywords:Telecommunications, Regulation, Monopoly, Cost functions, Scale economies, Subadditivity

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