Subsidies and Distorted Markets: Do Telecom Subsidies Affect Competition?

32 Pages Posted: 14 Jul 2008

See all articles by Eric P. Chiang

Eric P. Chiang

University of Florida - Warrington College of Business Administration - Department of Economics

Janice Alane Hauge

University of North Texas

Mark A Jamison

University of Florida - Warrington College of Business Administration, Public Utility Research Center

Date Written: July 14, 2008

Abstract

There is general concern that producer subsidies distort competition. We examine a telecommunications subsidy system that transfers money from low cost regions to high cost regions of the U.S. Even though the system is designed to be competitively neutral, we find evidence that the system, combined with carrier of last resort policies, promotes cream skimming by entrants in low cost areas and deters entry in high cost areas, where incumbents are more likely than entrants to receive subsidies. We are unable to rule out the possibility that state regulatory policies favor incumbents in states that are net beneficiaries of the subsidy system.

Keywords: Subsidies, Universal Service Fund, Telecommunications, Regulation

JEL Classification: L52, L96, O11

Suggested Citation

Chiang, Eric P. and Hauge, Janice Alane and Jamison, Mark A., Subsidies and Distorted Markets: Do Telecom Subsidies Affect Competition? (July 14, 2008). Available at SSRN: https://ssrn.com/abstract=1159817 or http://dx.doi.org/10.2139/ssrn.1159817

Eric P. Chiang

University of Florida - Warrington College of Business Administration - Department of Economics

Gainesville, FL 32611-7140
United States

Janice Alane Hauge

University of North Texas ( email )

1155 Union Circle #305340
Denton, TX 76203
United States
940-565-4544 (Phone)

Mark A. Jamison (Contact Author)

University of Florida - Warrington College of Business Administration, Public Utility Research Center ( email )

PO Box 117142
Gainesville, FL 32611
United States
352-392-6148 (Phone)
352-392-7796 (Fax)

HOME PAGE: http://warrington.ufl.edu/purc/facultyinfo.asp?WEBID=1217

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
108
Abstract Views
1,034
rank
263,824
PlumX Metrics