Subsidies and distorted markets: Do telecom subsidies affect competition?

Eric Chiang, Janice Hauge () and Mark Jamison ()
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Janice Hauge: University of North Texas

No 7002, Working Papers from Department of Economics, College of Business, Florida Atlantic University

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 (search for similar items in EconPapers)
JEL-codes: L52 L96 O11 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2007-11
New Economics Papers: this item is included in nep-com, nep-mic and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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http://www.ericchiang.org/files/Chiang_Hauge_Jamison_JRE.pdf First version, 2007 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:fal:wpaper:07002

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