Evaluating Telecom's Cross-subsidies: Political Favours at a Heavy Cost?

Robert Albon

Australian Economic Papers, 1991, vol. 30, issue 56, 10-20

Abstract: Cross subsidies have always been implicit in Australian telecommunications pricing, partly as a consequence of political pressures. Telecom's fully distributed costs approach results in an estimate of their costs far higher than the Bureau of Transport and Communications Economics' incremental cost approach. Various studies of the cross subsidies are assessed, with emphasis on the recipients' valuations of the subsidies and on who pays the implicit taxes (i.e., STD users). Direct subsidies are advocated on the grounds of estimates of the relative deadweight losses and because they are more open. Use of direct subsidies would pave the way for demonopolizing Telecom's network. Copyright 1991 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

Date: 1991
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