Was PLDT a natural monopoly?: An economic analysis of pre-reform Philippine telecoms

Prior to the liberalization of the telecommunications sector in 1993, telephone service in the Philippines was provided by a private monopoly. This article examines whether or not the Philippine Long Distance Telephone Company's (PLDT) virtual monopoly of the market was justifiable based on cost conditions. Our empirical test reveals that natural monopoly properties did not exist in PLDT's provision of toll and local telephone services. At least two firms could have provided the same level of services without increasing total cost. Our results therefore provide evidence in support of the demonopolization of the industry.