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 n distribution of subscriber loop lengths, n frequency of busy-hour calling, and n 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 n Gabel and Kennet n Mitchell n 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