Scale Economy Coefficients for Telecommunications

An analysis of the principal functions of the telecommunications network is presented. Economies of scale are hypothesized in both the system capacity of the telecommunications utility´s plant units and in its equipment supplier´s manufacturing processes. For the transmission and distribution functions, distance is treated as a quasi-scale variable and specific and neutral technological changes are also estimated. With an exponential form of model, unit costs are regressed on these determinant variables. This analysis indicates generally that there are moderate to high economies of scale with system capacity and lower but still significant economies of scale with manufacturing volume. These results carry important implications for plant investment and product decisions.