A further step to deregulation, or the risk to destroy the incumbent: Chile’s local telephony market

Abstract

There is no experience in the world where entry in local telephony has been as significant as in Chile. This paper addresses the question whether local telephony in Chile is competitive enough so as to deregulate rates. We analyze competition among LEX and the degree of substitution between local and mobile telephony. We conclude that asymmetric regulation and in particular, the rigid structure imposed to the regulated LEX has not only negatively affected it, but also compromises the investment in the whole sector. Consequently, deregulation became highly recommended.