1 / 5

The structural transformation of the Intercity Telecoms Market (ITM)

The structural transformation of the Intercity Telecoms Market (ITM).

ilar
Télécharger la présentation

The structural transformation of the Intercity Telecoms Market (ITM)

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The structural transformation of the Intercity Telecoms Market (ITM) Some regulatory economists have long argued that the long distance telephone market (or ITM) has long since been “transformed” from natural monopoly to a structure that can efficiently accommodate several long distance providers.

  2. What caused the transformation? • Economists identifytwo principal factors: • Growth of demand • Technological change--specifically the developmentof microwave transmission

  3. Growth of demand • Population growth • Rising personal income and highincome elasticity for long distanceservice. • Proliferation of computers anddata processing.

  4. $ The shift from coaxial cableto microwave might shiftthe cost curve from AC1 to AC2. Or itmight shift all the way to AC* D3 D1 D2 AC1 AC2 P0 AC * P* 0 Q* Q0 4Q* Q

  5. Notes on Figure 15.6 (p. 489) • If demand remains at D1, then we have a natural monopoly even if the cost curve shifts to AC*-- because this cost function is subadditive up to output Q0. • If demand shifts to D2, and the cost function is given by AC*, then natural monopoly has been transformed. • If the demand curve shifts to D3, and assuming the cost curve is given by AC* (after the shift to microwave technology), then the market can support 4 long distance firms each operating at minimum efficient scale (MES), where MES = Q*.

More Related