We present a duopoly competition model to illustrate how the simultaneous incorporation of two US federal regulatory programs negatively affected telecommunications competition during the past decade. Our model shows that the simultaneous implementation of the Universal Service Fund policy that...

There is general concern that producer subsidies distort competition. We examine a telecommunications subsidy system that transfers money from low cost regions to high cost regions of the U.S. Even though the system is designed to be competitively neutral, we find evidence that the system,...