The effect of ownership on telephone penetration

It is well known that telephone penetration (the number of telephones per 100 population) is strongly related to national income. This report examines whether telephone penetration is significantly influenced by type of ownership (ie whether the telephone system is owned and operated by a private company or a government organization) and by postal responsibility (ie whether the telephone system is run by the same organization which runs the postal system). Economic theory and evidence from other industries suggest that private ownership increases output, and one might guess that postal responsibility would tend to restrict telephone penetration - but are these hypotheses correct and are the effects significant? The author concludes that telephone penetration is significantly more responsive to per capita GDP and to population density in private systems than in government-owned systems. Joint responsibility for postal systems has no significant effect on telephone penetration.     

Access to and penetration of ICT in rural Thailand

This paper presents an econometric study of information and communication technology (ICT) in all 70,000 rural villages in Thailand, where the ICT considered consists of fixed-line telephone service, mobile telephone service, public telephones, computers, and Internet service. The results may provide information that helps policymakers decide where to put limited resources to promote ICT, and helps profit-seeking ICT companies target regions that maximize revenues. The study found that education is far more important than income in predicting the percentage of households who adopt ICT services, and that some unexpected variables such as the penetration of pickup trucks are useful predictors as well. Even in areas where fixed-line phone service is available, 70% of households with computers choose not to become Internet subscribers, although many presumably have enough money and technical knowledge. By separating availability from penetration of ICT, the study found that they can have different predictors, which means that researchers who do not separate them may get misleading results. There is no evidence showing mobile telephone service as a substitute for fixed-line telephone service. Also, public telephone service had little or no impact as a substitute for fixed-line or mobile telephone service, so phone companies need not fear that deployment of more public telephones will decrease their subscribership. Finally, there appears to be significant unmet demand for telephone service in rural Thailand where the infrastructure does not yet exist.     

Dream or reality: providing universal access to basic telecommunications in Nigeria?

Nigeria has publicly announced its intentions to make basic telecommunications, specifically telephones, affordable and universally available to its people. However, several issues make this proposition especially difficult for countries such as Nigeria. For instance, Nigeria's population is large at 110 million with less than 1% presently able to access telephones. Furthermore, over 70% of Nigerians, the majority of them poor, live in rural areas where telephone lines do not presently exist. This paper studies the universal service proposition viz a viz these conditions by analyzing Nigeria's attempts to provide telephone service since the country's independence in 1960. The paper notes impending problems with Nigeria's attempts to achieve critical mass, which is essential for universal access. Ultimately, it suggests various strategies that the country should use to stimulate critical mass and achieve universal access.     

The Pacific Islands. Policy options for telecommunications investment

The Independent Commission for World-Wide Telecommunications Development (Maitland Commission) reported that telecommunication networks, including public telephone systems, are an infrastructure which aids economic development throughout the world. The Commissions objective is to bring the majority of the world's population within easy access of a telephone and, in time, other communications services. Development in the Pacific Islands region is slowed by a lack of efficient communications. The islands are spread over 29 million square kilometers of ocean and extremely vulnerable to natural disasters. Pacific Island Nations (PINs) have problems of foreign exchange, skill shortages, and poor credit terms. Telecommunications infrastructure audits showed the overall regional teledensity of 3 telephones per 100 population. The individual countries vary form 8.3 in Fiji to 1.5 in Papua New Guinea and 25.2 in New Zealand. The population of the developing island countries is in mostly rural areas where there is a chronic shortage of telephones. The constraints on radio systems can be overcome with satellite technology. The new technologies are coming on the market faster than these countries can afford to handle them. By using satellite technology and sharing facilities PINs can greatly reduce the cost of telecommunications systems. Fiber optic cables will be used to carry large volumes of traffic over major routes while satellites can be used for a array of services for the smallest PIN nation to the largest route rim country. Work is being done to standardize the equipment specifications and to develop policies for the coordination of regional telecommunications training. To further facilitate communications development in this area, changes need to be made in international funding priorities for development, and recommendations by the Maitland Commission must be taken seriously.     

The Role of Hospital and Market Characteristics in Invasive Cardiac Service Diffusion

Little is known about how the adoption and diffusion of medical innovation is related to and influenced by market characteristics such as competition. The particular complications that are involved in investigating these relationships in the health care sector may explain the dearth of research. We examine three invasive cardiac services: diagnostic angiography, percutaneous coronary interventions, and coronary artery bypass grafting. We document the relationship between the adoption by hospitals of these three invasive cardiac services and the characteristics of the hospitals, their markets, and the interactions among them, from 1997 to 2014. The results show that the probability of hospitals’ adopting a new cardiac service depends on competition in two distinct ways: (1) hospitals are substantially more likely to adopt an invasive cardiac service if competitor hospitals also adopt new services; and (2) hospitals are less likely to adopt a new service if a larger fraction of the nearby population already has geographic access to the service at a nearby hospital. The first effect is stronger, leading to the net effect that hospitals duplicate rather than expand access to care. In addition, for-profit hospitals are considerably more likely to adopt these cardiac services than are either nonprofit or government-owned hospitals. Nonprofit hospitals in high-penetration, for-profit markets are also more likely to adopt them relative to other nonprofits. These results suggest that factors other than medical need—such as a medical arms race—partially explain technological adoption.     

The future for telephony in Japan

Discussions about the future of telecommunications tend to focus on data transmission, facsimile or video communication, rather than on traditional telephony. However, the importance of telephony in society will remain unaffected for the next few decades, and it has many aspects which need attention. In this article, the share of telephones in the public network, present and future, are first reviewed, with an examination of telephone traffic growth. Second, technical possibilities for improving telephone service are pointed out. Finally, the author discusses the benefits of the evolving digital network for telephone subscribers.     

Conflicting national policies: The creation of the euro and the rebalancing of telecommunications prices

Government departments have diverse interests, and on certain occasions, the need to achieve a priority objective in one department may lead to the adoption of inefficient policies in other areas, with long-lasting consequences. In this paper, we analyze the rebalancing of the telecommunications tariffs that took place in the European Union before and after the liberalization of the market in 1998. We show that the objective of satisfying the Maastricht inflation condition to allow participation in the European Monetary Union from 1999 led some national governments to block the rebalancing of telecommunications tariffs. Specifically, we demonstrate that in the years immediately before the liberalization of the telecommunications market, those countries that faced greater difficulty achieving the inflation objectives of the Maastricht Treaty reduced, rather than increased, the prices of local telephone calls and line rental. Furthermore, these countries did not intensify efforts to rebalance their tariffs after the creation of the euro. Our paper also shows that in this period the countries that diverged most from the inflation condition invested less in their telecommunications infrastructure.     

The imbalances of telephone traffic for the United States

The US posts a large and growing deficit in international telephone services, a phenomenon often blamed on the accounting rate system. Using data for international calls between the US and 148 foreign destinations between 1991 and 1997, this paper finds that the increasing payment deficit for the US is associated with decreasing accounting rates. In other words, the international revenue settlement is related more to imbalances in telephone traffic than to accounting rates. The econometric model shows that growing asymmetries in teledensity, market concentration, and income levels between the US and the rest of the world explain the imbalances. Therefore, the appropriate solution to the payment deficit in telephone services is to focus on long-term economic factors that determine the flow of traffic.     

Communication satellites for rural development

The author points out that telecommunications in rural areas are an essential infrastructure for development, and that appropriately designed satellites could form an important part of rural communications technology. He argues that hybrid systems involving clusters of communities, served by a single ground station and rural radio telephone interconnection, are likely to be lower cost than all-satellite or terrestrial-only systems.     

Welfare effects of the Telecommunication Reform in Mexico

The telecommunication sector in Mexico was highly concentrated until 2013. The sector was mostly composed by a dominant player, a rationed market (low density of services), a poor institutional design, high tariffs, and weak regulation agents. The Herfindahl-Hirschman (HHI) index was 5333 for mobile telephone and 7,029 for fixed telephone services—among the highest scores in the world. In order to promote competition in the sector, Congress approved a reform in 2013 to establish a new regulator empowered to impose asymmetrical rules in the case of the predominance of a single firm. A declaration of preponderance of the dominant player was issued, promoting free interconnection rates and the mandatory sharing of its passive and active infrastructure with the rest of the firms in the industry. The new institutional design led to increased competition in the sector, decreasing the mobile and fixed telephone prices while increasing the coverage and penetration of these services. In this article, an applied general equilibrium model for the Mexican economy is employed to assess the impact of the Telecommunication Reform in Mexico in the telephone sector, consumer welfare, and income distribution. The model is static, encompassing 10 types of consumers (rural and urban and the five income quintiles) and 40 sectors (of which four are disaggregate telecommunications industries). It assumes fixed wages and capital rental prices as well as idle resources. The main results indicate that the effects of the reform are not minor; the drop in telephone prices would reduce the general consumer price index by almost 2%, and the value added would increase by more than 3%, benefiting mainly households in the highest income quantiles.     

Disconnecting: Understanding decline in universal service

At a time when choices for voice service and funding for universal service were growing, the United States experienced an unprecedented drop in household telephone penetration. Universal service in voice telephony is generally taken for granted in the United States. However, recent data from the FCC shows a significant decline in the number of U.S. households that have a telephone of any kind (including mobile), from a peak in telephone penetration of 95.5% in March 2003 down to 92.9% in November 2005. This decline is both statistically significant and meaningful, as approximately 2.6% of U.S. households could not easily reach 911 for emergencies. This study uses regression analysis of state-level data to determine what drove this decline in universal service. The results demonstrate that the recent decline in universal service in the U.S. is driven by an increase in black population, inadequate consumer protection laws, and increases in wireless telephones per capita. Lifeline effectiveness does not appear to mitigate the decline in penetration, while Link-Up effectiveness may have a limited effect.     

Group purchasing, nonlinear tariffs, and oligopoly

Loyalty discounts are nonlinear tariffs that condition rebates or marginal prices on meeting aggregate purchase or market share targets. These discounts are widespread, and are often the impetus for consumers to form buying groups, or group purchase organizations (GPOs). This paper models the competitive effects of the introduction of a GPO into a market within which the preferences of the GPO's members are horizontally differentiated. While nonlinear tariffs are an effective way for a monopolist to extract consumer surplus, when two suppliers compete using such schedules, the results are far more competitive in comparison to simple Bertrand–Nash competition with linear tariffs. This result holds when the product of each of the suppliers is attractive to a substantial portion of consumers. In our model, the nonlinear schedule puts all customers “in play” to a degree that contrasts sharply with the competition at the margin characteristic of constant per unit prices. Moreover, competing in nonlinear tariffs removes allocative inefficiency that can result from single price competition.     

Substitution between Mobile and Fixed Telephones in Korea

The stock of mobile telephones has surpassed fixed phones in Korea. Presently, the density is more than 60 of every 100 inhabitants. Thus, the potential for mobile telephones to become a substitute for, and directly compete with fixed telephones, has become evident. The aim of this paper is to examine the impact of rapid growth in mobile telephones on the access demand for traditional fixed telephones. The study shows that a 1% increase in the number of mobile telephones results in a reduction of 0.10–0.18% in new fixed connections and a 0.14–0.22% increase in fixed disconnections. The empirical analysis is carried out with Korean regional panel data for the period 1991–1998. The study is relevant to several important public policy issues.     

Local exchange competition in early US network development: considerations for developing countries

This paper examines the claim that competition between the Bell system and independent telephone companies, and not AT&T's regulated monopoly, was responsible for the rapid growth in telephone penetration in the United States. A mathematical model is developed to test if competition contributed to network expansion, when alternative explanations such as diffusion and economic growth are also taken into account. The model is estimated with time series data on telephone penetration in the US from 1876 to 1982, using both Ordinary Least Squares (OLS) and Feasible Generalized Least Squares (FGLS). The results indicate that local exchange competition is indeed a significant influence on increase in telephone penetration, even in the early stages of network development. This has clear policy implications for the current transition to competition in developing countries.     

Die Verteilung der Kosten des Ausbaus der Erneuerbaren

Germany’s private and industrial consumers have to bear electricity prices that are among the highest in Europe, a major reason being the massive subsidization of green electricity via feed-in tariffs. To dampen future electricity cost increases, numerous suggestions were published recently. They differ substantially with respect to their distributional impacts, transaction costs, political feasibility, and their impact on the cost-effectiveness of the future promotion of renewable technologies. This article’s qualitative evaluation of the most prominent proposals indicates that, more or less, they all fall short with respect to these evaluation criteria. In conclusion, decision-makers would be well advised to reconsider Germany’s renewable energy goals. Consideration should be given to either abolishing these ambitious goals or to improving the cost-effectiveness of the future expansion of renewable energy technologies to dampen the likely continued increase in electricity prices.     

Die Ökonomik nichtlinearer Tarife am Beispiel Bahnstrom

Nonlinear tariffs such as quantity discounts are common in infrastructure industries. One reason is that nonlinear tariffs enhance efficiency compared to linear pricing schemes. An example is the nonlinear tariff for the all-inclusive 16,7-Hz Traction Power Supply. Linear tariffs would lead to inefficiently high total costs and to inefficiently low utilization of the infrastructure. In fact, both a perfectly informed price regulation and competition would imply nonlinear tariffs. Finally, all market participants, suppliers and consumers, can in principle benefit from nonlinear tariffs.     

The impact of the Uruguay Round on tariff escalation in agricultural products

Tariff escalation (i.e. higher tariffs on processed agricultural products than on their input commodities) has been one of the obstacles for developing countries in their efforts to establish processing industries for exports. This article assesses the changes in tariff escalation resulting from the Uruguay Round (UR) tariff concessions, examining the agricultural import markets of EU, Japan and the US. The approach consisted of comparing the base and bound tariffs, as listed in the UR tariff schedules, of actual input/output processing relationships, taking also specific tariffs into account. Three main conclusions can be drawn. First, more than half of the commodity pairs have positive tariff wedges (escalating tariffs), about 10 per cent have no tariff wedges (input and output tariffs are equal) and the remaining one-third of the commodity pairs have negative tariff wedges (de-escalating tariffs). These numbers are roughly the same for both base and bound tariff wedges. Second, as a result of the UR tariff concessions more than 80 per cent of the tariff wedges have decreased (in absolute values, i.e. positive wedges have become less positive and negative wedges have become less negative). Convergence towards zero is therefore a common feature. Third, after the full implementation of the UR tariff concessions, high levels of nominal tariff escalation will still remain for a number of commodity pairs, highest in Japan and lowest in US. Considering only the positive tariff wedges, these will average 17 per cent after the implementation of the UR (down from 23 per cent of the base years). Finally, the study has certain methodological shortcomings, and a degree of caution is in order for countries contemplating export diversification and investing in valued-added industries. There are well known problems with “water in the tariffs” and the difference between applied and bound rates of duty that are common to all studies on this subject. In addition, a number of factors that are beyond the scope of this study should also be taken into account when export diversification is considered. These relate, inter alia, to the competitiveness of the export commodities or industries in question, availability of appropriate technologies and infrastructure, product standards, technical regulations and a host of consumer preference issues having to do with brand recognition as well as product characteristics.     

Tariff-mediated network effects versus strategic discounting: Evidence from German mobile telecommunications

Mobile telecommunication operators routinely charge subscribers lower prices for calls on their own network than for calls to other networks (on-net discounts). Studies on tariff-mediated network effects suggest this is due to large operators using on-net discounts to damage smaller rivals. Alternatively, research on strategic discounting suggests that small operators use on-net discounts to advertise with low on-net prices. We test the relative strength of these effects using data on tariff setting in German mobile telecommunications between 2001 and 2009. We find that large operators are more likely to offer tariffs with on-net discounts but there is no consistently significant difference in the magnitude of discounts. Our results suggest that tariff-mediated network effects are the main cause of on-net discounts.     

Municipal electric utilities’ role in telecommunications services

Municipal electric utilities (MEUs) are increasingly expanding into telecommunications services. Such entry is interesting in several respects. First, MEUs marry two potential pathways for the growth of telecommunications access infrastructure and services: public ownership of last-mile facilities and electric power company expansion into telecommunications. Second, municipalities are key early adopters of next generation access technology in the form of both fiber-to-the-home (FTTH) and broadband wireless (e.g., WiMax) systems. Third, MEUs are at the nexus of the debate over the proper role for local government in promoting broadband Internet access. Most homes in the United States are served by investor-owned local telephone and cable television providers, using company-owned wireline infrastructure. These providers have generally opposed municipal entry, arguing that it will crowd out private investment and represents an unfair and less efficient form of competition. A number of states have acted to limit—or in some cases—to promote such entry. Before engaging in this debate, it is necessary to have a clearer picture of the current state of municipal entry and the local demographic, cost, industry, and policy factors that influence its evolution. To address this need, this paper reports the results of an empirical analysis of MEUs that provide communications services to the public. This analysis shows that MEUs are more likely to offer such services if they also provide internal communication services to support their electric utility operations (scope economies); are relatively close to metropolitan areas (lower backhaul costs); are in markets with fewer competitive alternatives (cable modem and DSL service availability limited); and which are less encumbered by regulatory barriers to entry (in communities in states which do not restrict municipal entry into telecommunication services). Of these results, the competitive impacts are the least straight-forward to interpret, suggesting richer dynamics and avenues for further research.