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Monopoly

Monopoly. Pros Easier to effect social policy (universal service for example) Economies of scale and scope Cons Lack of incentive for innovation Inefficiencies in pricing Averaging of rates and services—often leading to bypass. Competition. Pros Pricing efficiencies

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Monopoly

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  1. Monopoly • Pros • Easier to effect social policy (universal service for example) • Economies of scale and scope • Cons • Lack of incentive for innovation • Inefficiencies in pricing • Averaging of rates and services—often leading to bypass

  2. Competition • Pros • Pricing efficiencies • Encouragement of innovation • Customer orientation • Cons • Possible degradation of service • Possibility of un-served areas • Potential for excess capacity

  3. Market Structures • Monopoly • Duopoly • Oligopoly • Total competition

  4. Market segmentation • Terminal equipment • International long distance • Domestic long distance • Basic local services • Leased lines • Wireless • Value-added services or networks (data for example)—now termed “broadband” • AND WHAT DO WE DO WITH NEW SERVICES LIKE VoIP?

  5. Is there a need to draw regulatory boundaries? • By service? • Local versus long distance • By provider? • Duopoly provision • By industry segment? • Cable versus telephony; wireline versus wireless • Not at all?

  6. Why regulation? • In a monopoly structure: control the actions of the monopolist • In a totally competitive structure: probably not necessary??? • In an imperfectly competitive structure: control dominant carriers, etc.

  7. Purpose of regulation • Economic: encourage efficient use of important resource • Social policy: fair and equitable access to services • Industrial policy: building of infrastructure; global trading position

  8. Regulatory Approaches • Type approval (CPE) • Certification or licensing: market entry and exit • Resale: encourage use of excess capacity • Interconnection: control of connection and the terms of interconnection • Spectrum allocation: wireless

  9. What to regulate? • Price • Quality of service • Conduct • Standards • Interconnection • Social policy attainment

  10. QoS • Regulation or monitoring • Canada, UK and Australia—remedies required; Portugal fines • Monitoring in most other OECD countries • Emphasis on providing comparative information for users

  11. Pricing trends • Reduction in distance and time sensitivity • Scandinavian countries and Belgium for example now charge same rate for local and domestic long distance calls • New Zealand call capped at $2 once exceeds 20 minutes; Bell Canada allows unlimited calls within Canada for $17 per month • Bundling of services

  12. More pricing trends • Rebalancing—local rates increase as long distance rates decrease • Metered local service in virtually all countries except US, NZ, Australia, Canada • In OECD, fixed voice rates stable or a bit higher from 2008-2010

  13. Broadband • In OECD from 2008-2010 • Prices declined by average 2% per year (DSL) and 5% per year (cable) • Speeds increased 15%--20%

  14. Wireless • Tends to be calling party pays (CPP) • Has led to issue of termination charges • Roaming has been an issue • In OECD 2008-2010, mobile rates have declined 6% for low usage and over 20% for medium and high usage

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