infonet-economy

Based upon time series data published by PTT prior to regulatory reform, this paper investigates whether Swiss telecommunications qualify as a natural monopoly. Employing the subadditivity concept for multiproduct industries, alternative specifications of quadratic cost functions are estimated. The results of these estimations are ambiguous and demonstrate the difficulty of empirically substantiating a natural monoply claim. It is argued that the natural monopoly concept is of limited usefulness for informing policy decisions.