Price setting and regulation for telecommunications in the absence of reliable and detailed cost information

Abstract

Abstract The economic prescription that prices be cost-based is intended to simulate pricing outcomes that would result under competitive circumstances. However, in many countries, the requisite cost information is unavailable in the detail and reliability required for such cost based pricing decisions. Technological change, resulting in the growth of broadband services, will make infrastructure cost allocation even more complicated. In the absence of detailed reliable cost information, what economic guidance can be provided as to what changes in price levels and structures are desirable? This paper suggests that, in this situation, direct observation of price movements in telecommunication markets that are experiencing (or expecting) competition can help to provide guidance about the nature, extent and direction of costbased price levels and structures. The Russian situation is used to illustrate application of the proposed approach.