Telecommunications

Time Consistency in Regulatory Price Setting: An Australian Case Study

Created on Saturday, 13 June 2009 10:00

Time consistency refers to situations where a policy that is optimal ex ante proves not to be optimal ex post, creating the risk of opportunistic policy reversals. While the threat of such reversals has received widespread attention in the theoretical literature, testing whether policy is indeed time consistent is challenging. This paper implements such a test by comparing the depreciation profile established by the Australian 268 regulator at the outset of a regulatory period with the actual path of allowed recovery, and finds that the regulator acted in a time-inconsistent manner.

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Time_Consistency_in_Regulatory_Price_Setting.pdf

Telecommunications

An Optimal Policy Framework for a New Broadband Network

Created on Wednesday, 29 October 2008 11:00

While there are at least seven full facility-based broadband competitors, competitive facility-based fixed line investments appear to be declining in favour of use of Telstra’s network. It also appears that no carrier is presently willing to make significant fixed broadband investments without substantial regulatory commitments and protections relative to those currently available.

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ErgasRalph2008_Optimal_NBN_framework_long.pdf

Telecommunications

Asymmetric termination charges to support small networks

Created on Wednesday, 11 February 2009 11:00

Termination charges toward newer entrants are often set asymmetrically to exceed efficient costs for telephony traffic. Such practices are said to be beneficial to consumers as well as providing competition a “leg-up”. However claims of consumer benefit are dubious at best, while infant industry arguments are no more likely to apply to 268 than they apply anywhere else. Appropriate forms of termination regulation are then considered.

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AsymmetricTermination20090203.pdf

Telecommunications

Telecommunications access pricing: The Australian experience

Created on Thursday, 24 January 2008 11:00

Few issues have been as controversial in Australia as the setting of access prices in 268. This paper provides a survey of the Australian experience in that regard. It shows that:

1. Access charges have been set in a way that does not respect "adding up" constraints, and notably the requirement for full cost recovery;
2. The resulting shortfalls have been increased by distortions in relative prices between substitutable services;
3. The failure to allow recovery of even "efficient" costs has bee aggravated by decisions by the ACCC that plainly involve "time inconsistency", i.e. that amount to expropriation of the sunk capital of investors in the access provider; and
4. The distortions associated with thus setting the level of access charges incorrectly have been accentuated by very steep rates of decline in access charges that far exceed any reasonable estimate of the rate of reduction in costs.

 

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Telecommunications_access_pricing_080126.pdf