Telecommunications Pricing: Theory and Practice

Telecommunications Pricing: Theory and Practice

by Bridger M. Mitchell, Ingo Vogelsang
     
 

ISBN-10: 0521416671

ISBN-13: 9780521416672

Pub. Date: 11/28/1991

Publisher: Cambridge University Press

The past decade has witnessed a surge of pricing innovations in the US telecommunications industry. This volume systematically reviews recent innovations in the economic theory of pricing and extends results to conditions that characterize telecommunications markets. It then examines the implementation of normative pricing theory in selected US telephone tariffs. The…  See more details below

Overview

The past decade has witnessed a surge of pricing innovations in the US telecommunications industry. This volume systematically reviews recent innovations in the economic theory of pricing and extends results to conditions that characterize telecommunications markets. It then examines the implementation of normative pricing theory in selected US telephone tariffs. The experience accumulated in the United States provides a rich and diverse data base and a laboratory for examining the practical consequences of pricing innovations.

Throughout this volume the objective is to develop and illuminate the relationships between the normative economic theory of pricing -- with its objectives of social welfare, economic efficiency, and fairness -- and telecommunications pricing as it is practiced by business and regulators. In particular, the new pricing schemes are related to the theory of multiproduct and nonlinear pricing. The book describes the welfare and competitive properties of such pricing schemes and draws conclusions for future pricing problems in the areas of broadband networks and open network architecture. Many of the general theoretical pricing principles and lessons from US pricing experience should prove directly applicable to telecommunications services in other countries and to other industries, including electricity and natural gas supply, air and rail transportation, and postal and parcel services.

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Product Details

ISBN-13:
9780521416672
Publisher:
Cambridge University Press
Publication date:
11/28/1991
Pages:
328
Product dimensions:
6.14(w) x 9.21(h) x 0.87(d)

Table of Contents

List of figures
List of tables
Acknowledgments
IPricing and Telecommunications
1Introduction3
1.1Telecommunications pricing3
1.2Theory and practice4
1.3Overview6
2Telecommunications production, costs, and pricing7
2.1Stylized telecommunications technology7
2.2The US context15
2.3Major tariff developments17
IIRecent Developments in the Normative Economic Theory of Tariffs
3Types of tariffs23
3.1The context23
3.2Normative framework26
3.3Overview of tariff types34
4Linear tariffs38
4.1Marginal-cost prices38
4.2Ramsey pricing (demand-oriented tariffs)43
4.3Ramsey pricing with competition48
4.4Ramsey pricing with consumption externalities55
4.5Definition of services61
4.6Customer-class pricing64
4.7Dynamic pricing66
4.8Conclusions72
5Nonlinear tariffs73
5.1The consumption framework73
5.2Two-part tariffs77
5.3Two-part tariffs with consumption externalities81
5.4Discriminatory two-part tariffs83
5.5Smooth nonlinear tariffs85
5.6Discrete multipart and optional two-part tariffs95
5.7Tying/bundling versus unbundling105
5.8Nonlinear tariffs in oligopoly112
5.9Second-best piecemeal policy114
6Cost-based tariffs118
6.1Subsidy-free pricing118
6.2Cost-axiomatic pricing134
6.3Fully distributed-cost pricing137
6.4Special issues of carrier rates140
6.5Second-best piecemeal policy revisited143
IIITelephone Rate Structures in the United States
7Regulation and US retail rates149
7.1The impact of regulation on rate setting149
7.2Basic US retail rates156
7.3Price caps167
8Optional calling plans176
8.1Theory of optional tariffs reconsidered176
8.2Development of AT&T's optional calling plan188
8.3Nationwide optional calling plans194
8.4FCC guidelines for optional calling plans199
9Business bulk-rate tariffs201
9.1Local rates201
9.2WATS tariffs202
9.3800-number services206
9.4Virtual private networks207
9.5Discounts for bundling208
9.6Private lines210
9.7Custom tariffs211
10Pricing of carrier services213
10.1Carrier access rates213
10.2Bypass of the local exchange216
10.3Incentive effects216
10.4Nonlinear pricing of carrier access221
11Social tariffs224
11.1Telephone penetration224
11.2Coals of social tariffs227
11.3The history of social tariffs228
11.4Description of state programs230
11.5The costs of social tariffs239
11.6The welfare impact of social tariffs243
IVSynthesis
12Synthesis of theory and practice249
12.1Lessons from pricing theory249
12.2Assessing practice in light of theory252
12.3Pricing and the future258
AUS telephone price indexes264
Bibliography287
Index301
Selected list of RAND books308

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