Estimating scale economies of the wireless telecommunications industry using EVA data

This paper proposes a new estimation method of total cost and average cost curves and applies it to the telecommunications industry. The method is more flexible and entails less hassle for data collection than traditional methods. The results show that the long-run average cost (LRAC) curve is downw...

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Bibliographic Details
Published in:Telecommunications policy 2009-02, Vol.33 (1), p.29-40
Main Authors: Nam, Changi, Kwon, Youngsun, Kim, Seongcheol, Lee, Hyeongjik
Format: Article
Language:English
Subjects:
Asymmetric regulation
Asymmetry
Cost analysis
Economic value-added (EVA)
Economies of scale
Efficiency
Estimating techniques
Estimation
Market efficiency
Mobile communications networks
Production structure
Regulation
Scale economy estimation
South Korea
Studies
Telecommunications
Telecommunications industry
Telecommunications policy
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Summary:This paper proposes a new estimation method of total cost and average cost curves and applies it to the telecommunications industry. The method is more flexible and entails less hassle for data collection than traditional methods. The results show that the long-run average cost (LRAC) curve is downward sloping, revealing the presence of economies of scale in production. The two largest Korean mobile network operators are realizing full economies of scale, while the smallest operator is not. Finally, the paper recommends three policy alternatives that the Ministry of Information and Communication of Korea can draw on to increase efficiency in the Korean mobile telecommunications market.
ISSN:0308-5961
1879-3258
DOI:10.1016/j.telpol.2008.10.005