Optimal local exchange carrier size

Optimal firm size and patterns of returns to scale among the local exchange companies in the U.S. telecommunications industry are estimated for the ye ars: 1975, 1978, 1981, 1984, 1987 and 1990. The independent companies displ ay increasing returns to scale, while the Baby Bells display constant or de creasing returns to scale. The independent companies operate at a scale sma ller than optimal size, while the Baby Bells operate at a scale greater tha n optimal size. Efficiencies can be gained by industry restructuring, by al lowing independents to expand their size while the Baby Bells can be downsi zed to create smaller units.