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Telecommunications Demand: A Survey and Critique
... where LU i is the usage (calls, minutes) by household i over a specific period , T i a vector of telephone characteristics, including price, and X i a vector of household socioeconomic characteristics. The few local usage studies done prior to 1980 have been reviewed and criticized by Taylor (1980). Additional studies have been published since then, all designed to assess the effects of usage sensitive pricing on different population groups. ...
... where M t is the total number of intrastate toll messages in year t, X t the state per capita income, P t a price variable, and T t the number of telephone stations, with generally no distinction between residential and business calls (Taylor 1980). These studies suggest mean price elasticities of -0.21 and -0.67 for the short and long runs, and mean income elasticities of 0.39 and 1.33 for the same horizons. ...
... Another, more recent, stream of point-to-point models has been initiated by the seminal paper by Larson et al. (1990), who extend the basic theory of telephone demand, presented in Taylor (1980), by using reverse traffic (from j to i) as a determinant of the traffic from i to j. Their theoretical framework is briefly summarized. ...
... where M t is the total number of intrastate toll messages in year t, X t the state per capita income, P t a price variable, and T t the number of telephone stations, with generally no distinction between residential and business calls (Taylor 1980). These studies suggest mean price elasticities of -0.21 and -0.67 for the short and long runs, and mean income elasticities of 0.39 and 1.33 for the same horizons. ...
... Another, more recent, stream of point-to-point models has been initiated by the seminal paper by Larson et al. (1990), who extend the basic theory of telephone demand, presented in Taylor (1980), by using reverse traffic (from j to i) as a determinant of the traffic from i to j. Their theoretical framework is briefly summarized. ...
... The social sciences literature dealing with telecommunication flows has been reviewed, classified along different geographical scales (local, regional/national, and international), with an emphasis on the methodologies used to analyze the empirical data, and on the nature of the results. There is no claim to exhaustiveness, and the reader might usefully consult Taylor (1980 Taylor ( , 1994) for further references and descriptions. However, to the best of our knowledge, the studies reviewed here are representative, and should provide, together with the theoretical framework presented in Section 5, a good basis for further empirical research on telecommunication flows. ...
Telecommunication systems carry information over space, in the same way as transportation systems carry goods and people. In both cases, these movements are necessary to complete economic and social transactions, and can be viewed as derived demands. Telecommunication flows analysis may therefore provide empirical insights into the patterns of spatial interactions between individuals, businesses, cities, regions, and countries. Various modeling techniques have been used, with real-world data and at various geographical scales, by economists, geographers, and other social scientists to better understand these patterns. The purpose of this paper is to critically review the literature dealing with telecommunication flows, focusing on both modeling techniques and empirical applications and results. This review is organized along different geographical scales: local, regional, and international.
... One of the main sources of information on telephone demand is Taylor's (1980 and survey of the theoretical and empirical literature. Taylor notes that the erosion of the internal cross-subsidies in the telecoms industry meant that US research in the 1980's has seen an increase in the number of studies on the demand for residential access. ...
... The small but negative coe¢cients for the two price variables con…rm the deterrent represented by telephone access charges. Calculated at the sample mean, the coe¢cient for the connection charge gives rise to an access elasticity of -0.065 which lies above the range of connection charge elasticities reviewed by Taylor (1980) (-0.02 to -0.04), but within the results quoted by Cain and McDonald (1991). The coe¢cient for annual line rental in turn suggests an elasticity measure of -0.033 which is lower than the results reviewed earlier in this article. ...
... In fact, businesses often subsidized residential users. Quite apart from considerations of equity, the economic rationale for cross-subsidization stemmed from the assumption that the demand for business telephone service was relatively inelastic compared to that for residential service (Taylor, 1980). Therefore, businesses could absorb higher tariffs more easily than residential users. ...
Telecommunications are increasingly being recognized as critical strategic infrastructure for ensuring the success of national social and economic development plans and programs, improving international competitiveness and integrating domestic economies into the world economy. In an effort to overcome chronic deficiencies in telecommunication performance and distribution of services, many developing countries have been engaged in liberalizing their telecommunication sectors. Liberalization here referring to the movement away from the traditional state-owned monopoly structure and towards the introduction of privatization and competition. This study examines the consequences of these developments by analyzing telecommunication developments in 81 developing countries from 1977 to 1988. The study is in two parts. The first part is theoretical and (a) identifies the technological and economic forces driving change in the sector; (b) reviews the policy options available to developing countries; (c) critically discusses the arguments both for and against the introduction of competition and privatization in the sector; and (d) outlines the importance of governmental commitment to the growth of telecommunications. The second part is empirical and presents the findings of a cross-national longitudinal evaluation of the impact of changes in policies governing sector structure for the supply and manufacture of telecommunications equipment, facilities and services, as well as the impact of governmental commitment, on sector performance and distribution. The evaluation is conducted in the context of the economic factors which are thought to condition the relationship between telecommunication policies and outcomes. It finds that movement toward liberalization has had little independent impact on telecommunications sector performance, but is associated with adverse conditions of access to and availability of services. In contrast, governmental commitment to the growth of the sector is found to be positively related with improvements in both sector performance and distribution at all levels of national income and under different compositions of economic activity. The findings suggest that if sector growth and development are important national priorities then attention should be turned more toward stepping-up government investments rather than towards sector restructuring.
... Fixed Costs and Recreation Value more precisely using the demand function for boating trips. Our theoretical model is analogous to those used to study two-part tariffs (Taylor 1980), where the consumer pays an entry fee for access to a good, followed by a constant price per unit. In our theoretical model, we assume that each boater owns her own boat, although all that matters for empirical analysis is that the cost of owning a boat is borne by someone, as explained later in this article. ...
Welfare measures from travel cost models net out variable costs such as travel expenses specific to each trip. Costs that are fixed in the short run, such as expenses for equipment that is used over multiple trips, are typically ignored and implicitly netted out. The resulting net value of recreation trips, or consumer surplus, is appropriate for long‐run analysis when consumers can fully adjust their expenditures. However, in cases where some costs are difficult to adjust in the short run, such as when boat owners do not sell their boats in response to the transient effects of an oil spill, traditional consumer surplus measures underestimate the total welfare change. We explain this underestimation and show how to correct for it by adjusting traditional consumer surplus estimates upward. We illustrate our procedure using a model of recreational boating developed to assess damages from the Deepwater Horizon oil spill. In that case, accounting for boating fixed costs resulted in a 50% increase in estimated value relative to estimates of consumer surplus alone.
... As it is known, demand conditions for Telecommunications services are determined by volume of traffic of calls in each market segment and prices (see for example Squire, 1973 andRohlfs, 1974) as well as by several other macro and micro economic factors, discussed in detail by Taylor (1994). Hence, it is very interesting to assess the impact of regulation, competition and privatization on Telecommunications demand for EU countries before and after the liberalization period. ...
This paper investigates the main determinants of Telecommunications demand for European Union (EU) countries using a panel data set for 19 EU countries over the period 1991-2010, capturing the years before and after the liberalization process. The goal is to clarify whether any changes in the demand of Telecommunications, as expressed by volume of traffic in local, mobile and international market segments, are attributed to regulatory process or to some other major drivers, taking also into account the relevant price elasticities. It turns out that the regulatory process does not seem to have significant impact on demand for Telecommunications services for the first period of liberalization.
... This framework is the workhorse of vast empirical research into the topic. Two books by Taylor (1980 and provide an excellent summary and a synthesis of those early theoretical works and a review of the existing empirical research. Taylor (2007) presents an updated overview of the theoretical and empirical literature. ...
... In the first 28. The use of average revenue per minute as a measure of price is controversial in the literature, and has been criticised by myself ( Taylor, 1980;1994), as well as others. The problem, as is well-known, is that, because of possible measurement error and the presence of multi-part tariffs, a dependence between average revenue per minute and the error term can come into play that leads to a biased and inconsistent estimate of the price elasticity. ...
The purpose of this paper is to provide a survey of the current state of telecommunications demand analysis. While the upheavals that have occurred in world telecommunications markets have generated many benefits, few of these have befallen telecommunications demand analysts. Twenty years ago, the boundaries of the telecommunications industry were stable and well-defined, and the same was true of the services provided. Telephone companies were either state-owned or regulated monopolies, which (among other things) made for a readily available body of data on a consistent and comprehensive basis. Wireless telephony was in its infancy, and the Internet was scarcely a rumor. Now, all is different. Industry boundaries are in a constant state of flux, telecommunications markets are increasingly competitive, wireless and the Internet have changed the way that many people communicate, cable access may be poised to make a major presence, and company-based data have become increasingly fragmented and proprietary. As a consequence, telecommunications demand analysts must now contend with a rapidly changing and expanding mix of services, take into account emergent substitutes and complements, deal with firm (or company) demand functions as opposed to industry demand functions, and collect and organize primary data. The upshot is that estimation of telecommunications price and income elasticities was clearly much easier 20 years ago than it is today.
... Previous studies reported on the correlations between telephone calling rates and other measures of economic activity, such as GDP, value of imports, and value of exports (Taylor, 1980;Drewer, 1973). The CCITT concluded that long-distance telephone traffic increased at roughly double the rate of increases in real GDP. ...
The role of telecommunications and its contribution to the cross-strait relationship and economic development between China and Taiwan are identified. Correlations between cross-strait telephone traffic and economic activities, such as trading and investment, are statistically analyzed. Results show that cross-strait telephone traffic is significantly correlated with economic activities between China and Taiwan. This article concludes that reliable telephone services between China and Taiwan may reflect in the amount of cross-strait trading and economic activities.
... Except for Yatrakis (1972), Kellerman (1990), and Sandbach (1996), all the previous studies involve only one origin country, and generally small samples, which makes it difficult to generalize the results with a strong degree of certainty. The number and type of explanatory variables vary from study to study, and their choice is generally not related to a clear theoretical framework, except for the role of telephone prices (Taylor, 1980) and callback effects (Larson et al., 1988). Communities of interest, whether related to trade, culture, language, religion, politics, or geography, are poorly accounted for. ...
Despite the growing role of international telecommunications in the new global economy, the spatial structure of these flows, their socio-economic determinants, and their relationships with other international flows are not very well understood. This research makes use of a sample of 4137 country-to-country annual telephone flows (minutes of conversation) for the year 1995, involving 103 origin and 204 destination countries. This sample, obtained from the International Telecommunications Union (ITU), provides an opportunity for more comprehensive analyses and modeling than those in past related studies, where generally only one originating country is involved. These data are matched with country-to-country trade flows from the IMF, and country-level telecommunication (e.g., main lines, Internet hosts), socio-demographic, and economic variables obtained from the ITU, the UN Statistical Yearbook, and the CIA World Factbook. Various spatial interaction models are then estimated, involving several variables characterizing the origin and destination countries, great-circle distance, spatial contiguity, commonalities in language and religion, political and former colonial relationships, membership in special trade groups, and actual trade flows. In addition, intervening opportunities and competing destination variables are introduced into the model to test the effects of the international spatial structure on telephone flows. The results underscore the critical role of a country's (1) level of telecommunication equipment, (2) size of the business sector, (3) exports and imports, and (4) touristic attraction. The importance of distance, contiguity, commonalities in language and religion, and membership in culturally homogeneous regions and trade groups, is confirmed, as is the complex role of spatial structure. Among the most intriguing results is the empirical confirmation that electronic mail via the Internet may substitute for international telephone flows.
... Given that > 1 is the empirically valid case and it is largely argued that " is relatively small for telecom goods (see Taylor, 1980;Trotter, 1996), these parameter restrictions seem to be reasonable. ...
This paper presents an endogenous growth model where, in line with the recent empirical evidence, the telecommunications industry (telecom) is an engine of growth. In such a framework, this paper analyzes the channels through which telecom contributes to economic growth and focuses on market structure analysis for telecom, in the light of the recent changes in it. This paper suggests how the market structure of telecom and the competition type in the telecom market can matter for its contribution to economic growth. It also proposes the optimal market structure for telecom from the social welfare perspective. In addition, it suggests the direction of telecom policies which can improve social welfare, and uses its theoretical results for qualitative evaluation of the Telecommunications Act of 1996 and similar policies.
... The interested reader may wish to consult Taylor (1980) and the references cited therein for additional information on both the theory and empirical measurement of telecommunications demand. We will next examine the characteristics of technology in the telecommunications industry, paying particular attention to the potential sources of both economies of scale and more general multiple output subadditivity in telecommunications cost functions. ...
The theory of natural monopoly has been substantially transformed in previous years. Ina clear and straightforward style, Dr. Sharkey gives an integrated presentation of the modern approach to this subject. Although the book is mainly conceptual in nature, the final chapter on natural monopoly in the telecommunications industry shows the practical applications of the theory. After an historical survey of natural monopoly, there follows a chapter stating and explaining the main results as well as giving a preliminary overview of the rest of the book, where concepts such as the subadditivity of costs, optimal pricing, sustainability, and destructive competition are presented. The essence of the subject is presented in a manner accessible to the general reader, though the book also provides a synthesis of the subject suitable for advanced students.
... Ramsey prices requires knowledge of the demand, as well as the marginal and stand-alone costs of different services. The demand function is assumed to be of constant elasticity, with parameter estimates obtained from Taylor (1980) and Cain and MacDonald (1991). The assumed long-run elasticity values are as follows: ...
Economic theory has long been concerned with determining the optimal pricing scheme for a multiproduct monopoly, but it has been quite difficult to make use of developments in practice. Using LECOM, the Local Exchange Cost Optimization Model, over three stylized city maps, and assuming price elasticity values taken from the literature for four standard outputs of the local exchange, we demonstrate how fully distributed cost prices, Ramsey-optimal prices, Shapley prices, and standalone prices can be computed for a variety of baseline output levels. Analysis of consumer surplus changes relative to the marginal cost baseline shows that while Ramsey pricing maximizes social welfare over the set of schemes considered, only the Shapley approach results in subsidy-free prices.
... Behavioral perspectives on phone adoption were rare, or steeped in the annals of the Bell system (Dunn, Williams, & Spivey, 1971), with early work finding that adoption was related to age, income, education, employment, urban residence, and status as head of household (e.g. Perl, 1978;Mahan, 1979;Taylor, 1980). Mahan (1979) found that those less likely to have a phone included minority homes and homes with young children, which were also identified by Perl (1978), along with along with male-headed, single-person, and Southern as well as spouse-absent households. ...
With the expansion of telecommunication and online technologies for the purpose of survey administration, the issue of measurement validity has come to the fore. The proliferation of automated audio services and computer-based survey techniques has been matched by a corresponding denigration of the quality of traditional phone survey data, most notably as an outcome of falling response rates. This trend, combined with the introduction of screening technologies and answering machines, represents a barrier to the proper execution of survey research. Whereas the question was once, “can technology-assisted surveys achieve the same level of validity as traditional phone surveys?”, the question now becomes, “what are the relative advantages and disadvantages of technology-assisted and phone surveys?” Each has its own challenges and opportunities, and this paper begins to explore these. The present study provides further insight into the validity of telephone and Internet survey data, and explores whether or not the robustness of relationships between variables varies by survey mode.Study data were provided by two surveys, the first of which was conducted in a metropolitan area of the Midwestern US, with interviews of 505 adults using a computer-aided telephone-interviewing (CATI) system. The second was a national survey of 2172 respondents conducted over the Internet by a commercial research firm that sends requests to a diverse set of potential respondents, who logged onto the survey site to participate. Results suggest that weighting in an attempt to achieve parametric matching does seem to increase robustness of relationships and, in this age of poor response rates, this seems to demand an increased use of parametric weightings. Implications of study findings for telematic survey practitioners are discussed.
The means by which consumers communicate internationally have changed dramatically in recent years. The emergence of wireless international calling as well as VoIP have created substantial new communications pathways and vehicles for consumers. This paper extends the focus of traditional international demand studies to incorporate these new pathways for international communications. It draws upon a modern database that incorporates both mobile and VoIP calling made over the 2009-2012 period between 25 countries around the world. Among other things, it finds that modern consumers of international calling are most sensitive to mobile and VoIP telephone prices and that the deployment of broadband has replaced the deployment of fixed telephone lines as a key enabling infrastructure for international calling. The results suggest that future studies of international communications should certainly incorporate these features.
In this chapter the theory of optimal pricing is adapted and used for an empirical welfare analysis of the telecommunication tariffs in the Federal Republic of Germany. Though only rough estimates of marginal costs and demand elasticities are currently (1979) available, all empirical evidence seems to suggest that the present structure of tariffs is not optimal in any sense whatever. Prices are set above marginal costs and huge profits arise which then are used to cover deficits from postal services and as subsidies to the governmental budget. But even at the 1979 level of profits it seems possible to lower social losses considerably simply by restructuring telecommunication tariffs.
This chapter identifies some of the issues encountered in estimating demand models for corporate clients and then uses related results to suggest pricing strategies that might be more profitable.
Dynamische Preispolitik, also Preispolitik im Zeitablauf, spielt in Theorie und Praxis eine große Rolle. Die vorhandenen Ansätze der dynamischen Preistheorie berücksichtigen jedoch nur Singulärgüter, deren Nutzen primär aus dem (isolierten) Besitz und ihrer (quasi kostenlosen) Verwendung resultiert.
Ziel der Autoren ist es, einen Ansatz zur Abbildung dynamischer Preiseffekte für Güter vorzustellen, die als Systemtechnologien bzw. Netzeffektgüter zu bezeichnen sind. Die für diese Güter typischen Interaktions- und Dependenzeffekte zwischen einzelnen Teilleistungen bedingen eine mehrdimensionale, von mehreren Anbietern beeinflußte Preisabsatzfunktion, deren Auswirkungen auf die dynamische Preisplanung dargestellt werden.
Am Beispiel des Telekommunikationsmarktes werden optimale Preisverläufe des Marktpartners „Systembetreiber“ unter Berücksichtigung der dependenten Wirkung aller relevanten Preiskomponenten abgebildet. Dabei werden die Kostendynamik und die zeitlich vertikale Interdependenzen der Nachfrage berücksichtigt.
In Simulationsläufen werden die Auswirkungen unterschiedlicher Preissetzung der Marktpartner auf die dynamische Preispolitik des Systembetreibers aufgedeckt.
On January 1, 1995, services provided by local exchange carriers (LECs) in California were open to competition.1 The California Public Utilities Commission (1994) decision that ordered increased competition also restructured the LECs’ prices concurrently with allowing competition.2 While a large array of services was subject to repricing, the most important services were basic exchange access, intraLATA toll, and switched carrier access. The basic residential flat rate was increased from 11.25 for Pacific Bell and from 17.25 for GTE-California, toll prices were reduced by about 45 percent, and switched carrier access rates dropped by about 50 percent.
Aggregate time series and point-to-point panel data approaches to modelling Canadian long distance calling are compared. It is found that, while both models yield similar sets of aggregate elasticities, the point-to-point panel data models provide more detailed information on consumer behavior. Furthermore, the panel data models take advantage of the disaggregate data available and avoid the problems inherent in aggregate models when the rates of changes in the micro data are different.
Using contemporary historical data, the analysis has examined the impact of cross-subsidization on technology diffusion within telecommunications networks for local exchange sector telecommunications firms in the United States for the years 1995 to 2000. Firms obtaining greater cross-subsidies engage in greater technology diffusion via network modernization using digital technologies. Contingent on the institutional setting, cross subsidies have risen. These amounts have been put to relevant use in the diffusion of technology via deployment of digital infrastructure. The principles of subsidization are considered negatively as they have presumed anti-competitive consequences. In technology diffusion they have played a positive role, as the evidence shows. From a radical subjectivist perspective, cross subsidies generate financial capital for firms, which permits them to deploy high quality technology investments such as broadband and these investments can be used for entrepreneurial experiments in providing several customer services.
The function of network planning is considered to be governed by objectives and to use an approach that matches with the development of information technology. This article aims to enhance understanding of the subject and its various related issues.
With the divestiture of AT&T in 1984, most states gave local exchange carriers (LECs) an exclusive franchise on 1+ intraLATA
toll traffic and forbid interexchange carriers (IXCs) from providing intraLATA toll services. However, a number of states
now permit facilities based intraLATA toll competition, and the market structure for intraLATA competition is a current issue
in a number of jurisdictions.
Distributed lag models are a type of dynamic econometric model often used in demand analysis. Such models take account of the fact that consumers do not respond instantaneously to changes in their economic situation. The Koyck lag model, qt = δqt−1 + βppt + βyyt + ϵt, is a particularly simple model form often fitted to data. If qt = logQt, pt = logPt, yt = logYt where Qt, Pt, Yt are quantity, price and income data, respectively, then βp, βy represent one-period price and income elasticities of demand, while represent long-term price elasticities and income elasticities, respectively. This paper considers data generated by a model in which qt has different geometrically declining responses to changes in pt and yt, specified by parameters δ1, δ2, respectively. It determines large sample biases in elasticity estimates arising from incorrectly fitting either a static model, or a Koyck lag model to such data using ordinary least squares.
In this paper we deal with the spatial distribution of telematics (a conflation of telecommunication and informatics) and the regional characteristics influencing it. We are interested in this topic because basically telematics could essentially alter the regional structure. Therefore, in the first section we construe a simple cost-minimizing model in order to derive factors impacting on the telematics endowment of a region. In the next section the hypotheses derived from this model are completed by sociological determinants of the regional telematics equipment. In the second part of the paper we test our hypotheses with the aid of an econometric study and of a questionnaire study. The sample is confined to two telematics tools, namely telefax and teletex, and geographically to the German state of Bavaria. Our main conclusion is that potentially decentralizing techniques do not work decentralizingly. We substantiate this conclusion with the factors which, in our opinion, mainly determine the regional endowment of telematics and those factors which will not alter in favor of peripheral regions.
Investigation of demands on information networks helps in the planning, design, and improvements of such networks. This article presents a mathematical model upon which such investigations can be based and describes how the model has been used for the investigation of a GULFNET (the research network of the Gulf Cooperation Council Countries) case study.
Purpose
This study aims to examine competitive entry in the presence of cross‐subsidization of firms in the telecommunications industry.
Design/methodology/approach
How variations in cross‐subsidies, received via the separations mechanism, influence firms to enter the territories of incumbents is assessed for the population of local exchange firms in the USA.
Findings
Firms able to obtain greater cross‐subsidies, on average, experience less entry within their territories. Competition has evolved considerably in the telecommunications industry in the last two decades.
Research limitations/implications
These results point to the need for evaluating cross‐subsidies, where these may still exist, so as to encourage entry.
Originality/value
This article is the first to look at the consequences of an important regulatory phenomenon and its impact on competition. The results at the confluence of regulation and competition policies have potential applications across the world.
Regional telecommunication flows, measured in terms of numbers of messages and conversation minutes, are analyzed with a systematic random sample of toll calls characterized by their timing, duration, cost, and origin-destination (O-D) locations. Point-to-point models are econometrically estimated, with such independent variables as destination market size, O-D distance, and average and time-of-day (TOD) prices, for the residential and business sectors separately. The results indicate that (1) the demands for calls and conversation minutes are price-inelastic and slightly elastic, respectively, (2) business demand is relatively more price-elastic than residential demand, (3) distance is a strong determinant of telephone demand, and (4) most TOD demand substitutions resulting from TOD price changes would take place between the daily and evening rate periods. Several areas for further research are outlined.
The USA has steadfastly held to a flat rate for local telephone service, whereas most other countries are characterized by a user-sensitive (measured service) system of pricing. Economic theory suggests some method of measured service pricing more accurately reflects the true costs of local service. This article seeks to determine how many US consumers could be induced to switch to measured service pricing, and using ordinary least squares, derives a model of the demand for measured service. The factors are identified that will induce the US population to move towards a measured service rate structure. The findings indicate that consumers are quite responsive to both relative price (between a local flat rate and a measured service rate) and advertising.
A recent decision by the Canadian Radio-television and Telecommunications Commission allows entrants to interconnect with incumbent telephone companies for purposes of providing switched (public) long-distance service. The decision represents a potentially very important step towards promoting competition in Canada's telecommunications industry; however, continued regulation of the industry, restrictions on foreign ownership and mandated cross-subsidization of local access from toll revenues raise grounds for concern that the actual consequences of the decision will fall short of the potential.
This paper evaluates the way in which subscriber line charges (SLCs) have affected telephone company residential customers, comparing residential telephone bills before and after the $2.60 SLC began. Customer bills are analyses using the net bill reduction method and the consumer welfare method. Bills of low-income area and senior citizen customers are studied using a similar technique. The cumulative bill savings accruing to customers whose bills have been lowered for outweigh the small increases experienced by those whose bills are higher. Since the SLC programme began, interstate long-distance usage by low-income area customers has grown, on average, to nearly the same levels as usage for all residential customers.
The usual outcome of the economic theory of regulation is that regulatory processes will be dominated by the few who have much to gain, at the expense of the many who will lose. This paper argues that this is not the outcome of political-regulatory choice in the US telecommunications industry. Regulatory authorities were here able to administer a toll-to-residence subscriber subsidy mechanism. This resulted in the AT&T divestiture and the FCC's efforts to end these subsidy flows. Unless the politically popular subsidy scheme is ended, competition is likely to produce a bifurcated US telecommunications network with most of the large users either bypassing the local network or migrating to discounted toll offerings.
This study has examined wage determination in the presence of cross-subsidization of firms in the telecommunications industry. How variations in cross subsidies received, via the separations mechanism used in the industry, influence some firms to pay a greater level of wages is assessed. The firms studied have been almost the entire population of local exchange carriers in the US telecommunications industry between 1995 and 2000. The analysis has established that firms which are able to obtain greater cross-subsidies, on average, in fact pay higher wages and the elasticity of the relationship is quite high. The study is the first of its kind assessing the relationship between an important regulatory variable that measures a ubiquitous process, such as cross subsidization, and the impact on employee wages.
The problem of identifying and measuring the effects of linguistic barriers on a contact network in Switzerland is examined. In a nation where four official languages prevail, the public telephone network may be considered as an adequate infrastructure to identify these kinds of effects. Linguistic barriers have been examined in a general way and taking differences in intensity of effect into account. Such differences may exist at the level of specific combinations of language interaction. Statistical estimations have been carried out with the aid of gravity models: one with dummy variables and the other by varying parameters. The main discontinuity in contact patterns arises between the German and French-speaking communities.
Recently many scholars have argued that society's welfare would be increased if the price of local telephone service were increased, and the prices for toll and enhanced telecommunication services reduced. In this paper we argue that the telecommunications policy literature has largely ignored the impact of varying technical standards on the cost-of-service. Consequently, the marginal cost of exchange service has been overstated. We also show that most work in this area has overstated the elasticity-of-demand for toll services. Taking into account quality and the appropriate elasticities, we conclude that no clear welfare gains will be achieved by raising the price of exchange service.
This study examines the ratio of long-distance to local telephone prices across a sample of developed countries. Using regression analysis, support is provided for the hypothesis that long-distance prices will be lower relative to local prices to the extent that large business subscribers are a larger share of the population of subscribers; however, the lobbying impact of business subscribers interacts with the anticipated deadweight costs of cross-subsidization. Prior competitive entry into the telecommunications sector is also associated with lower relative long-distance prices.
The attempts to estimate forward looking costs worldwide are based on cost models whose foundation is traditionally applied
discounted cash flow analysis — exactly the method that the real options methodology has shown can give terribly wrong results.
However, these cost models are ideal vehicles to adapt to the real options methodology. This paper develops a stylized cost
model to quantify several deficits associated with the cost models in use today. Even without the application of real options
methodology, the stylized results show a significant difference between the revenue requirements model and a traditional discounted
present value model. With the application of real options techniques, the differences become much greater.
The implications are significant. Policymakers who attempt to use proxy cost models to emulate the market behavior of firms
in competition without considering real options are acting unwisely. Policies that deal with costs cannot be effective without
a fundamental understanding of the implications of real options theory.
The study analyses the determinants of international telephone, telex, telegram and leased lines communication between the United States and 46 countries. It focusses on the role of multinational firms, international trading firms and new information technologies within the framework of the theory of transaction costs.Results of the econometric estimates suggest that: (a) technological conditions of telecommunication infrastructure, i.e., international diffusion lags of new information technologies, play an important role in the explanation of international telephone and telex telecommunication flows but not in the demand for telegraph and leased lines, (b) multinational firms use international telecommunication to reduce the coordination costs and are strong customers of leased lines and telephones, but less so of telex and telegrams, (c) international trading firms exhibit less clear preferences in the use of the different media to reduce transaction costs.
In this study we model the demand for outgoing international telephone traffic in Spain. We make use of a standard theoretical framework that incorporates the special characteristics of this type of telephone service. Consequently, equations for real expenditure per line and for the number of international calls per line are estimated.We use annual data for the 50 Spanish provinces for the period 1985–1989, and employ appropriate panel data techniques. The selected equations (one for expenditure per line in international traffic and another for the number of international calls per line) pass a battery of diagnostics. We conclude that this type of traffic, whether measured by expenditure per line or by the number of international calls per line, presents both high income and price elasticities. Moreover we find that price and income affect both the number of calls and their average duration.Likewise, we find a significant increase in social welfare when a tariff rebalancing that maintains the profit of the operating company is carried out.
Little empirical evidence exists as to the behavior of customers as they self-select from usage-senstive to flat rate tariffs. Since this study was performed prior to service availability, neither choice behavior nor usage stimulation were observable. The customer's survey response to a price query (‘would you purchase EAS at price $x’) is observed, however. We assume the customer is at least implicitly comparing his ‘projected’ benefits as measured by consumer surplus to the subscription price. By assuming an underlying demand for toll use, we can calculate the consumer surplus and derive the new usage level in terms of the initial or observed usage quantity. This framework provides a basis for a probabilistic choice model and allows joint prediction of penetration levels and usage stimulation rates. Customer demographics are introduced through the price parameter from the toll demand equation which relates stimulated usage to the initial usage level as well as in the choice parameters directly. Assuming a logistic framework for choice leads to rather a straight-forward maximum likelihood estimation problem. The resulting coefficient estimates are used to predict development and stimulation rates at various price levels.
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