PRICING MODELS FOR ISPs IN INDIA (original) (raw)

Pricing of Telecommunication Services

Textbooks in telecommunication engineering, 2020

Pricing plays an important role in any business endeavor. In competitive businesses, pricing decisions are based on several tactical and strategic considerations. Telecommunication network services pricing is based on several additional considerations. One example: Network services cannot be stored and dispensed later, unlike most commodities. Furthermore, network services are subject to regulations by the central and local government related to pricing and geographic availability in most countries, including the USA. We have seen in Chaps. 6 and 7 that congestion takes place as the demand for services goes beyond the capacity of the network. Past this point, any increase in the incident traffic results in progressively reducing throughput. This phenomenon increases customer frustration while lowering revenue of the service provider at the same time. Therefore, shaping users' demand plays an important role in pricing telecommunication services. The operational cost of a telecommunication network is largely invariant as a function of demand. This makes it desirable to have the network operate at its rated capacity most of the time, if at all possible. Pricing is one mechanism that can accomplish this. Pricing has one other major impact. Low prices stimulate demand and, conversely, higher prices suppress demand. However, in a competitive environment, high prices also stimulate capacity supply by emerging competitors based on the prospect of higher profitability. When the market is in equilibrium, the supply of network services closely matches the demand. Low prices, on the other hand, are likely to result in unmet demand as fewer suppliers would likely enter the market. Excessive pricing, on the other hand, will likely have unused network services capacity. In the absence of congestion, the marginal cost of telecommunication network service is close to zero. Stated in another way, the network service provider does not incur any additional cost to convey information if the network is not congested.

MULTIPLE INCENTIVE INTERNET PRICING FOR NRNs: A CASE STUDY

In this paper we develop a simple, flexible and adaptable pricing model for NRNs offering best effort services, taking into account the specific characteristics of these networks which differenciate them from those of the commercial ISPs, such as congestion patterns, cost sharing and government subsidization, governmental policy towards equal access and fairness, and over dimensioning of critical resources. The proposed model captures the above multi-objective policy concepts by using a pricing scheme consisting of two parts, a fixed part, that reflects specific policy parameters, and a variable part, that reflects the usage of the congested links. This later part is used in order to reduce congestion and provide the revenue needed in order to upgrade the congested resources. We discuss the case-study of applying the above model for calculating the tariffs for 1999 for the Greek Academic Research Network (GR-NET).

Pricing for IP Networks and Services

2000

The issue of pricing for Internet Protocol (IP) networks and services is addressed. The subject of pricing can be viewed from operational and from marketing perspectives. At the operational (network) level pricing aims at congestion prevention and flow optimization. At the marketing level pricing aims at attaining network operator objectives (profit and market share). The paper presents authors' experience in

Competition in Communication Networks: Pricing and Regulation

Oxford Review of Economic Policy, 2001

It is no surprise, then, that the communication sector has attracted the attention of policymakers and economists. But there are further reasons, beyond just the size of the sector, that single out communications as an area of particular interest. These reasons relate to the characteristics of the networks that deliver communication services. The characteristics are not individually unique to communication networks, as the discussion will make clear. The combination of all four factors is, however, unique to networks. We argue in this paper that the combination represents a particular challenge to the study and regulation of communication networks. The first characteristic is the cost structure of networks. Typically, there is a large fixed cost to building a network-digging up pavements to lay cables for a communication network, laying track or asphalt for rail or road travel, gathering all the information for the first edition of an encyclopaedia. For example, the estimated fixed cost of the British Telecom (BT) network in the U.K. accounts for approximately two-thirds of the total cost of the network (Oftel, 1999). Moreover, these costs are often sunk, i.e., irrecoverable, even if production stops. In contrast, the marginal cost of operating the network is low. On a standard telephone network, the marginal cost of making a local telephone call is of the order of 0.2-0.4 pence per minute. The marginal cost of producing an encyclopaedia is the cost of writing and shipping a set of CDs-a couple of pounds. The economies of scale that result from this cost structure often lead to "natural monopoly"-a dominant firm that captures the entire market. There are two observations to make at this point. First, this cost structure occurs in many, non-network industries. On its own, then, this factor does not raise any issues that are not familiar to any economist who has taken an introductory micro course. Secondly, there is often considerable debate about whether fixed costs are all that important in communication networks. In the past, it has been thought that the access part of telephone networks (the last segment of the network, from the last switch to the customer's premises, called the local loop) was such a significant cost that provision of access should be monopolized. Recently, this view has been brought into question. The next section considers this issue in some detail. Suppose that you want to send an e-mail. For most of us, we would first access the Internet by calling an Internet Service Provider (ISP) over a telephone line. The average email message is broken into around 20 pieces, or packets, by the sending computer. These packets are sent over a standard telephone line to the ISP, using a modem to convert the computer's digital information to the analog waves that telephone lines transmit. Each packet is transmitted to the nearest 'router': a special computer, dedicated to receiving and forwarding packets, that is the Internet equivalent of a telephone switch. The router consults a database to decide where to send the packet; it passes each packet onto another router, or to the destination if it is close enough. Once all the packets arrive at their destination, they are reassembled into the original e-mail and read. This seems pretty involved just for a message like "I'll be home in half an hour". Of course, each user does not care about which routers have handled the individual packets in an e-mail. What matters is the joint function of all of the components that go in to sending an email. In the language of economics, the different parts of the network are called complements-items that are worth more together than separately. This is the second factor that distinguishes networks. Again, complementarity is not unique to networks. I do not value particularly the individual components of the starter unit in my car; I care only about whether it starts when I turn the key. Taken with two other factors, however, complementarity is particularly marked in networks. First, positive externalities (about which, see below) mean that there are large gains to connecting two networks. Secondly, the cost structure means that some network segments are owned by a small number of firms, leading to a bottleneck problem. This is the case with the "last mile" of telephone wires running into houses, which typically is owned by an incumbent telephone company. Any telephone company offering services have to gain

08043 Summary--Perspectives Workshop: Telecommunication Economics}

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This Dagstuhl Seminar on "Telecommunication Economics" was organized to discuss and develop partially a strategic research outline among key people in order to enhance the competence in the field of telecommunication economics and respective network management tasks for integrated Internet and telecommunication networks. The view on respective guidelines and recommendations to relevant players (end-users, enterprises, operators, regulators, policy makers, and content providers), focusing on the provision of new converged wireless services and content delivery networks to people and enterprises determined an aspect of relevance.