An analysis of the cost structure of telecommunication industry in Korea

This study focuses on the current policy issues of the introduction of competition into a telecommunication market in Korea. The objective of this paper is an empirical analysis of the cost structure of telecommunication industry in Korea. Estimating KT(Korea Telecom)'s multi-product cost function, we characterize KT's cost structures such as economies of scale and economies of scope. We also attempt subadditivity test for cost function, which give the crucial clue for economic efficiency of the introduction of competition into monopoly market. As a result we show that KT's cost function has economies of scale and locally subadditive property.