AN APPLICATION OF STAND-ALONE COSTS TO THE TELECOMMUNICATIONS INDUSTRY

This article summarizes how new telecommunication services are affecting the design of networks, and examines how these developments can be taken into account in the identification of stand-alone and incremental costs. The results of applying cost models to Michigan Bell's current physical assets are reported. Contrary to received opinion, it is found that toll service is not subsidizing local exchange service; on the contrary, the new enhanced services are the greatest beneficiaries from participation in the common exchange network.