NGN Regulatory and Commercial Aspects
Commercial aspects of NGN interconnection should be not underestimated when setting wholesale rates.
We know that in wholesale there are two main groups of services that will be interconnected: regulated and not regulated. We can include also two other categories more common in the retail market, services that are perfectly homogeneous and 'status' goods.
What I intend with this?
Perfectly homogeneous a.k.a. commodities: The firm in this case is a passive actor with absolutely no power over the market for its products. This is a key feature of the ‘perfect competition’ model of the market place, in which the individual firm is a price-taker (e.g. voice services).
Premium (Veblen goods): The firm has a power on the market of this product. Elasticity for these products can be positive or neutral.(e.g. Euro2008).
We should consider all these elements when we decide the pricing mechanism we want to choose for our wholesale product.
Analyzing the issue I realized that there are a multitude of pricing mechanisms that are not always compatibles with retail. If we run a compatibility test between pricing and charging principles we see that they are almost always only directly compatible (for example, QoS at wholesale with QoS at retail).
In my study I have identified the implications at retail level of applying indirect relashionships. It might seems absurd but the less destructive methodology remains the per minute charging. I am not saying that it should be always used, but that there should be a direct relationships between wholesale charging and retail if we want to reduce market's distortion.
This would suggest that ….
1- there isn’t a best way to price products where there are a multitude of diverse services, but there’s a multitude of options.
2- Therefore it depends on several environmental factors e.g. product, market and regulation.
3- However combinations of models are not infinite or without constrains.
4- the importance of costs of wholesale products to assure innovation, fair competition and flexibility in the market.
We know that in wholesale there are two main groups of services that will be interconnected: regulated and not regulated. We can include also two other categories more common in the retail market, services that are perfectly homogeneous and 'status' goods.
What I intend with this?
Perfectly homogeneous a.k.a. commodities: The firm in this case is a passive actor with absolutely no power over the market for its products. This is a key feature of the ‘perfect competition’ model of the market place, in which the individual firm is a price-taker (e.g. voice services).
Premium (Veblen goods): The firm has a power on the market of this product. Elasticity for these products can be positive or neutral.(e.g. Euro2008).
We should consider all these elements when we decide the pricing mechanism we want to choose for our wholesale product.
Analyzing the issue I realized that there are a multitude of pricing mechanisms that are not always compatibles with retail. If we run a compatibility test between pricing and charging principles we see that they are almost always only directly compatible (for example, QoS at wholesale with QoS at retail).
In my study I have identified the implications at retail level of applying indirect relashionships. It might seems absurd but the less destructive methodology remains the per minute charging. I am not saying that it should be always used, but that there should be a direct relationships between wholesale charging and retail if we want to reduce market's distortion.
This would suggest that ….
1- there isn’t a best way to price products where there are a multitude of diverse services, but there’s a multitude of options.
2- Therefore it depends on several environmental factors e.g. product, market and regulation.
3- However combinations of models are not infinite or without constrains.
4- the importance of costs of wholesale products to assure innovation, fair competition and flexibility in the market.
Labels: interconnection, NGN, Regulation
posted by Marco L. Gatti at
Wednesday, January 23, 2008
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