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Potential Role of Economic Cost Models in the Regulation of Telecommunications in Developing Countries

Daniel A. Benitez, Antonio Estache, David Kennet () and Christian Ruzzier ()
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Daniel A. Benitez: Universidad Argntina de la Empresa

No 10_2000, UADE Working Papers from Instituto de Economía, Universidad Argentina de la Empresa

Abstract: Worldwide privatization of the telecommunications industry and the introduction of competition in the sector, altogether with the ever-increasing rate of technological advance in telecommunications, raise new and critical challenges for regulation. For matters of pricing, universal service obligations, and the like, one of the key questions to be answered is: “What is the efficient cost of providing the service to a certain area or type of customer?” As developing countries move forward with their efforts to build up their capacity to regulate their privatized infrastructure monopolies, cost models are likely to prove increasingly important in answering this question. Costs models deliver a number of benefits to a regulator willing to apply them, but they also ask for something in advance: information. Without this vital element no answer can be given to the question posed above. In this paper, we will introduce cost models and establish their applicability when different degrees of information are available to the regulator. The latter is accomplished by running the model with different sets of actual data from Argentina’s second largest city and comparing the results. Reliable and detailed information is generally a scarce good in developing countries, and we establish here the minimum information requirements that a regulator needs to implement a cost proxy model approach, showing that this ‘data constraint’ need not be that binding.

Keywords: Worldwide privatization; telecommunications industry; critical challenges for regulation (search for similar items in EconPapers)
JEL-codes: C80 L50 L90 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2000-08-01
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Journal Article: The potential role of economic cost models in the regulation of telecommunications in developing countries (2002) Downloads
Working Paper: The Potential Role of Economic Cost Models in the Regulation of Telecommunications in Developing Countries (2002)
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