Economies of scope in the local telephone exchange market

Using cost data generated by an optimization model, we evaluate the degree of economies of scope in the local telephone exchange market. We find that economies of scope between switched and non-switched services are a decreasing function of customer density, while there are strong economies of scope, regardless of customer density, within the switched telephone market.The authors gratefully acknowledge partial funding from the National Regulatory Research Institute at the Ohio State University. This work was made possible in part by research computing facilities provided by the City University of New York and Tulane University. We thank Editor Michael Crew, two anonymous referees, and David Malueg for useful comments and suggestions. Remaining errors are, of course, our own responsibility.The computer software (compiled for use on MS-DOS machines) and user instructions developed for this paper are available at reproduction cost from the authors at either address. The authors are willing to collaborate with interested researchers in modifications of the source code; however, source code will not be distributed due to confidentiality restrictions.