Universal service is the focal point of the economic dilemma faced by the telecommunications industry. The advent of competition spurred by several regulatory rulings is forcing rates towards economic costs. It is feared that this movement or the erosion of the toll-to-local subsidy with concomitant increases in local prices severely threatens the concept of universal service. To adequately address these fears, accurate elasticity of demand estimates for telephone access are required. This thesis develops estimates of these demand elasticities for access. These estimates are derived consistently from an underlying theory of demand for access. Furthermore, the simultaneous access and class-of-service choice problems are addressed similarly. This consistent development facilitates model usage and interpretation. For example, the model provides the best available estimate for the size of the network externality. Taking into account the underlying demand theory and acknowledging the problems associated with the aggregated nature of the data set (census tract data from 1980 Census), a modified probit technique is developed to estimate the demand model. The estimation methodology is implemented using an iterative least square procedure. To analyze the reasonableness of the algorithm and procedure, a Monte Carlo study is performed. In addition, a jackknife technique is employed to estimate variances of coefficients when the standard measures are unavailable. The model results are used to analyze the effect of current policy decisions. For example, for a proposed doubling of access prices the demand for access elasticity is found to be quite small, about -.04. A welfare analysis is performed to discuss the costs and benefits associated with moving to cost-based rates. This analysis also provides the basis for rate recommendations to facilitate the transition to competition while attempting to preserve the concept of universal service.
| Identifer | oai:union.ndltd.org:arizona.edu/oai:arizona.openrepository.com:10150/184006 |
| Date | January 1987 |
| Creators | KRIDEL, DONALD JACK. |
| Contributors | Oaxaca, Ronald, Taylor, Lester, Ransom, Michael |
| Publisher | The University of Arizona. |
| Source Sets | University of Arizona |
| Language | English |
| Detected Language | English |
| Type | text, Dissertation-Reproduction (electronic) |
| Rights | Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author. |
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