Costing and Pricing in Liberalized Telecommunications Markets



To fully exploit the potential of competition in liberalized telecommunications markets, the regulatory process should be as lean as possible The application of the disaggregated regulation method, which is characterized by the principles summarized below, is the adequate way to discipline sector-specific market power which still remains 1:
  • Minimal regulatory basis

  • The regulatory basis should not be extended beyond what is absolutely necessary. Thus, measures aimed at disciplining market power should be limited to monopolistic bottleneck areas (local networks). Price and interconnection regulation in the complementary long-distance networks is tantamount to overregulation.

  • Symmetrical Regulation

  • All active and potential providers of network services must be assured of symmetrical access to the monopolistc bottleneck areas so that (active and potential) competition can develop in full.


Market Power Price Differentiation Telecommunication Market Price Floor Market Entrant 
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  1. 1.
    See G. Knieps, The Concept of Open Network Provision in Large Technical Systems, EURAS Yearbook of Standardization, Vol 1, 1997, pp. 357–369.Google Scholar
  2. 2.
    The reader will find a detailed description of the “phasing-out” potential of sector-specific regulation in: G. Knieps, Phasing Out Sector-Specific Regulation in Competitive Telecommunications, Kyklos, Vol. 50, Fasc. 3, 1997, pp. 325–339.Google Scholar
  3. 3.
    See H. Albach, G. Knieps, Kosten und Preise in wettbewerblichen Ortsnetzen (“Costs and Prices in Competitive Local Networks”, Baden-Baden, 1997, p. 18 et seq.Google Scholar
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    See R.D. Willig, Pareto superior nonlinear outlay schedules, Bell Journal of Economics, Vol. 9, 1978, p. 56–69.CrossRefGoogle Scholar
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    For an illustration of this issue, see p. 343 Schuster/ Stürmer, Beck’scher TKG-Kommentar zu §3 TEntgV (“The Becks Telecommunications Act Commentary on Section 3 of the Telecommunications Rate Regulation Ordinance”), in which an explicit distinction is made between the determination of the costs of efficient service provision by the regulatory authority (by application of the benchmarking or engineering approach) and the documentation of the actual costs by the regulated company.Google Scholar
  6. 6.
    In this regard, see M.A. Salinger, Regulating Prices to Equal Forward-Looking Costs: Cost-Based Prices or Price-Based Costs?, Journal of Regulatory Economics, 1998, Vol. 10, pp. 149–163.CrossRefGoogle Scholar
  7. 7.
    See E.G. Furubotn, Economic Efficiency in a World of Frictions, Max Planck Institute for Research into Economic Systems, Discussion Paper 09-98, 1998.Google Scholar
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    See G. Knieps, Der Irrweg analytischer Kostenmodelle als regulatorische Schattenrechnungen — Eine kritische Analyse der Stellungnahmen zum WIK-Kostenmodell (“The Mistaken Approach of Using Analytical Cost Models as Regulatory Shadow Computations—A Critical Analysis of the Positions Taken on the Cost Model of the “Wissenschaftliches Institut fur Kommunikationsdienste”), MultiMedia und Recht, November 1998.Google Scholar

Copyright information

© Springer Science+Business Media New York 2001

Authors and Affiliations

  1. 1.Institute of Transport Economics and Regional PolicyUniversity of FreiburgGermany

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