Using call-back to demonstrate the discriminatory nature of the proportionate return rule

Abstract

The paper shows that the impact of a call-back service on the financial position of the monopolists in the countries where call-back service is offered, will in many cases be positive. The explanation for this result is found by observing cost and revenue streams, and by taking note of the various elasticities and feedback effects when ever there is an increase in traffic. For carriers selling call-back minutes to service providers, it is the proportionate return rule that provides then with a major, and perhaps the main source of profit on the call-back minutes they sell. The rule provides for the transfer of incoming IDD minutes and the associated hugely profitable settlement credits, from the other competing carriers, to the carrier selling call-back minutes. In this regard, the rule is not even-handed. The higher the market share of the carrier selling call-back minutes, the less well they do under the rule, so much so that under some circumstances a carrier selling call-back minutes at an apparent profit, would actually suffer losses on those minutes.