Economics behind Latin American telecom privatizations?

Abstract

We present a dynamic econometric model of the Mexican Telephone Company (Telmex). This model is used to compare different management strategies (state-owned monopoly, unregulated monopoly, regulated monopoly and competition) to find out the essential parameters that are pressing Latin American countries to restructure the telecom sector and to finally open it to competition. Simulating 16 years of behavior in various scenarios we show that long distance rates are the main reason forcing these fundamental changes.