High Cost Subsidies and Telephone Company Costs

27 Pages Posted: 11 Jul 2004

Date Written: October 2003

Abstract

Local telephone companies serving higher cost areas qualify for subsidies to defray many of their expenses. High Cost Loop Support assists companies with above-average loop expenses. Local Switching Support subsidizes switching expenses of companies with fewer than 50,000 lines. Both schemes encourage carriers to overbuild the network because a diminished portion of costs is recovered from the company's own customers. Technology choices may be skewed where network elements are subsidized at different rates. A cost model of the local telephone company demonstrates substantial excess expenditures, but the effect on technology choices appears modest.

Keywords: Universal Service, High Cost, Telephone Regulation

JEL Classification: L96, K23

Suggested Citation

Ryan, Daniel J., High Cost Subsidies and Telephone Company Costs (October 2003). Available at SSRN: https://ssrn.com/abstract=563121 or http://dx.doi.org/10.2139/ssrn.563121

Daniel J. Ryan (Contact Author)

T-Mobile USA ( email )

No Address Available

HOME PAGE: http://www.danryan.org

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