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This dissertation addresses the issue of cost subadditivity of two Canadian telecommunications carriers, Bell Canada and Alberta Government Telephones (AGT). Multi-output, multi-input models of the production structure of Bell Canada and AGT are estimated under various alternative hypotheses. Subadditivity tests are conducted for both these companies in order to increase understanding of the issues concerning the deregulation of the Canadian telecommunications network and to assist policy makers in their decisions. / The hypothesis that both Bell Canada and AGT are natural monopolies cannot be rejected. Important cost savings are realized from having each of these firms alone in their respective markets producing the total of toll and local calls. Allowing competition in AGT's market would increase costs by approximately 20%, while costs in Bell Canada's market would increase by twice as much. It is found that Bell Canada's cost savings, though still quite important, are significantly reduced after 1983. Apparently, the high adjustment costs that Bell Canada incurs in installing new capital equipment, its organizational restructuring that followed the liberalization of customer premises equipment in 1982 as well as the recent technological changes may explain this turn-about in Bell Canada's cost structure. / We conclude that the 1985 Canadian Radio-Television and Telecommunications Commission's (CRTC) decision not to deregulate Bell Canada's long distance public voice monopoly market (MTS and WATS) was socially optimal.