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ECO 436 Industry Seminar

ECO 436 Industry Seminar. Dr. David G. Loomis Illinois State University 309-438-7979. Telecommunications Costs and Pricing. I. LEC Costs. Depends on distribution of subscriber loop lengths, frequency of busy-hour calling, and technology. Fixed vs. Variable.

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ECO 436 Industry Seminar

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  1. ECO 436 Industry Seminar Dr. David G. Loomis Illinois State University 309-438-7979

  2. Telecommunications Costs and Pricing

  3. I. LEC Costs • Depends on • distribution of subscriber loop lengths, • frequency of busy-hour calling, and • technology. • Fixed vs. Variable

  4. Three approaches to estimating: • Econometric Models • Accounting Data • Engineering models

  5. Econometric Models • Perl and Falk • Rohlfs - C&P of DC • Shin and Ying - translog cost function

  6. Accounting Data • misleading due to separations

  7. Engineering Models • Gabel and Kennet • Mitchell • FCC/BCPM Models

  8. II. Local rates bear little relationship to costs. • What would happen if priced in line with costs? • Equity considerations • Network externality

  9. III. LD Costs and Rates • Over 40% of IXC’s revenues go to LECs through access charges • Complex pricing systems with discount plans.

  10. IV. Access Charges • Part of local charges should be recovered from LD rates • Two costs - NTS /TS local network costs • Two ways to recover costs - SLC and access rates

  11. Access Charges • Bypass • Changes over time

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