Comparative Study on the Price Cap Regulation of Telecom Retail Services

Comparative Study on the Price Cap Regulation of Telecom Retail Services

 

Title
Comparative Study on the Price Cap Regulation of Telecom Retail Services
Author
Kung-Chung Liu
Keywords
price cap, rate of return, X factor, telecom law, NCC, National Communications Commission
Abstract
When liberalizing telecom markets in the 1980s, countries world over adopted
the price cap regime to regulate retail prices that telecom companies may charge
their customers. Under price cap telecom companies may not raise the retail prices
above the level where efficiency gains—commonly known as the efficiency factor
or X factor-minus inflation rate. The National Communications Commission
(NCC) promulgated new X factors for various telecom services at the end of 2006:
X for ADSL is △CPI + 5.35%, X for the following three mobile services that utilize
900MHz and 1800MHz spectrums is △CPI+4.88%: local phones calling mobile
phones, prepaid services and services that charge the highest unit rates. This
paper examines price cap practices in the UK and USA and determines that its importance
is declining. This paper then critically reviews the adjustment of X factors
made by the NCC and finds three flaws: 1. The NCC failed to further reasonably
reduce ADSL prices. 2. Services that charge the highest unit price do not necessarily
suffer from insufficient competition. 3. There lacks a clear explanation about the
composition elements of the X factor. In conclusion it points to the fact that
retail price regulation is not to be maintained in the long run and more attention shall be shifted to the study and regulation of prices among telecom service providers.
Abstract Article

5 Downloads

17 Downloads

Leave a Reply

Your email address will not be published. Required fields are marked *