Ff!1!mitted. Acting Director Bureau of Economics Federal Trade Commission Market Power in Long Distance Telecommunications" Economist, Federal Trade Commission

AT&T's long distance prices are regulated in order to avoid supracompetitive pricing. This rationale presumes that AT&T possesses sufficient market power to raise prices substantially above marginal cost. This paper estimates firm specific demand elasticities for AT&T and the other large long distance companies using monthly data for 1988 through 1991 from five states. Lerner indices are calculated from these elasticities and interpreted as price markups over marginal costs. An upper bound for the piice markup for AT&T is estimated to be 18.6 % of price, which implies a potential deadweight loss of less than J.26% of current long distance revenue. This is likely to overestimate the current deadweight loss because competition has subsequently increased. . 1l1e views expressed here are the author's and do not necessarily reflect those of the Federal Trade CommIssion or any individual commissioner. I would like thank Tim Daniel, Jan Pappalardo and Steve Parsons for comments and Dolly Howanh for research assistance. Table of