Optimal Local Exchange Carrier Size

Sumit K Majumdar () and Hsi-Hui Chang

Review of Industrial Organization, 1998, vol. 13, issue 6, 637-649

Abstract: Optimal firm size and patterns of returns to scale among the local exchange companies in the U.S. telecommunications industry are estimated for the years: 1975, 1978, 1981, 1984, 1987 and 1990. The independent companies display increasing returns to scale, while the Baby Bells display constant or decreasing returns to scale. The independent companies operate at a scale smaller than optimal size, while the Baby Bells operate at a scale greater than optimal size. Efficiencies can be gained by industry restructuring, by allowing independents to expand their size while the Baby Bells can be downsized to create smaller units.

Date: 1998
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