Discussion Papers

Lorenz Nett

Tarifpolitik bei Wettbewerb im Markt für Sprachtelefondienst
Nr. 183 / März 1998
(no longer available)

Summary

The intention of the liberalization of telecommunications markets within European countries is to induce lower tariffs and to increase the diversity of telecommunications services offered by different firms. It is hoped that competition within the legal regulatory framework leads to a social welfare optimum in which universal service provision is still guaranteed. Although multimedia services become more and more important, basic telephony services still play the most important part for example measured by the turnover in the market.

In this paper we focus our attention on the tariff policy for public telephony services in a competitive German environment. We start by presenting the licencing paragraphes of the German telecommunications act which determine the legal market entry conditions. Subsequently we give a description of the strategic market potential of the main competitors of incumbent Deutsche Telekom AG. Pricing strategies are considered from a management point of view in section 3. We outline the main insights of a book named "Power Pricing" only recently published by Dolan and Simon. Strategic interaction in an oligopolistic market will be an additional topic in this section.

In section 4 we devote our attention to the specific elements of a tariff for basic telecommunication services. We start by presenting the variety of different parameters of a tariff which have to be determined by each supplier. Afterwards we discuss whether a firm should choose a simple or rather a more complex tariff structure. A sample of innovative tariff structures is given subsequently. In addition we present the range of parameters which determine value added services. These services become more and more important for successful operators especially by distinguishing its own product from the products offered by competitors.

Pricing policy of the dominant incumbent operator is specific in several aspects. On the one hand the dominant operator is restricted by price regulation and universal service obligations. On the other hand there are several strategic advantages of being the incumbent. These aspects are discussed in more detail. Furthermore we give a list of various strategic considerations which have to be taken into account if an incumbent makes a decision on the amount of the fixed monthly fee.

The recent tariff reforms of the Deutsche Telekom AG, Tarif 96, and the reform in spring of the year 1998 are considered in section 6. We give a description and analyse price changes as well as distributive aspects of the tariff reform in 1996.

Developments of tariffs both in monopolistic and liberalised markets as well as international tariff comparisons offer insights on how the market structure influences the tariff structure and the price level of telecommunication services. Having this in mind we analyse the data which have been generated in an OECD study. Finally, we summarize the main results and give an outlook on the future development of the tariff structure for basic telephony services.

Only German language version available.

Discussion Paper is no longer available.

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