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Economies of scope in the provision of narrowband and switched broadband services

By Neal C. Stolleman

Abstract

In this article the author adjusts data from studies conducted at Carnegie-Mellon University into the comparative costs of local exchange carrier (LEC) and cable television (CATV) provision of switched video service by applying more realistic assumptions about the treatment of LEC embedded copper plant. He finds that, contrary to the conclusion of those earlier studies, in the long run an integrated broadband and narrowband network supplied by an LEC would be cheaper than separate stand-alone LEC and CATV production processes for their respective services. However, these long-run savings could be jeopardized if inappropriate policy decisions are taken in the near future.

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