Telephone Communications in Canada: Demand, Production, and Investment Decisions

This paper presents a portion of an econometric model of the telecommunications industry in Canada, specifically dealing with demand, production, and investment decisions in the telephone sector. Following an introductory sketch of the structure of the sector is an analysis of demand for service, broken down where possible into business and residence, local and toll, categories. Estimation follows the procedures established by Houthakker and Taylor; the results suggest the presence of significant elements of habit formation with high income elasticities in all classes of demand for service, but indicate a substantial degree of price elasticity only in household demand for toll service.