Why Do the Poor and the Less-Educated Pay More for Long-Distance Calls?
Jerry A. Hausman
Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)
Tilburg Law & Economics Center (TILEC), Tilburg University; Criterion Economics, L.L.C.
Contributions in Economic and Policy Research, Vol. 3, No. 1, Article 3, pp. 1-26, 2004
The benefits of competition among the long-distance interexchange carriers (IXCs) are not realized equally by all their customers. Despite the declines in rates under the discount plans, we document that basic message toll service (MTS) rates have been rising for several years. We show that poorer and less educated customers pay more than better educated and more affluent customers. We suspect that the reason for this correlation is that they are more apt to pay the MTS rates or other high rates, and we present some preliminary evidence that this tendency explains the correlation that we find. We also present evidence that the payment differences exist even after controlling for usage. These findings are significant because it seems likely to us that these two patterns (rising MTS rates and higher payments by the poor and the less educated) will each be ameliorated by the entry of the regional Bell operating companies (RBOCs) into long-distance markets - a state-by-state regulatory process that was nearly complete as of the beginning of 2004.
Number of Pages in PDF File: 26
Keywords: competition, regulation
JEL Classification: D6,D63,J7,J78,J79,K2,K23,L1,L4,L44,L5,L51,L9Accepted Paper Series
Date posted: January 25, 2002 ; Last revised: November 2, 2009
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