A comparison of embedded and forward-looking local loop cost estimates for small rural telephone companies in Illinois

It is often represented as axiomatic in the telephone industry that telephone company costs are determined to a significant degree by demographic characteristics of the companies’ service areas. This article compares and contrasts forward-looking and embedded cost estimates for a group of rural local phone companies in Illinois and further examines the relationship between the estimates generated by the two respective cost methodologies and demographic characteristics of the companies’ service areas. This examination shows that relative intercompany forward-looking cost estimates are determined to a significant degree by demographic factors, but that relative intercompany embedded cost estimates are not.