The Telecommunications Act and FCC and state commission orders have made the proper consideration of cross-subsidization increasingly important, This article briefly surveys the economics literature on cross-subsidization. Caveats regarding the application of the theory to telecommunications, including cross-elastic effects, zero economic profit assumptions, and mistaken identification of loop costs as common production costs, are discussed. The patterns of cross-subsidy and claims of their existence in the industry are considered. The FCC's recent orders are discussed in the context of the relevant economics literature.
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TERI Sch Adv Studies, Dept Policy & Management Studies, New Delhi, India
Council Energy Environm & Water, New Delhi, IndiaTERI Sch Adv Studies, Dept Policy & Management Studies, New Delhi, India
Mehta, Tarun
Sarangi, Gopal K.
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TERI Sch Adv Studies, Dept Policy & Management Studies, New Delhi, IndiaTERI Sch Adv Studies, Dept Policy & Management Studies, New Delhi, India