Lester D. Taylor

Telecommunications demand in theory and practice

List of Figures. List of Tables. Preface. 1. Introduction and Overview. 2. Theory of Telephone Demand I: Basic Results. 3. Theory of Telephone Demand II: Extensions of Basic Results. 4. Business Telecommunications Demand. 5. Recent Studies of Residential Access Demand. 6. Recent Studies of Toll Demand. 7. The Demand for Local Calls and Related Local Services. 8. Business Telephone System Demand, Total-Bill and Socio-Demographic Effects. 9. Consumption Externalities. 10. Price Elasticities in the Hearing Room: the Promise and Limits of Econometric Analyses of Telecommunications Demand. 11. Evaluation and Conclusions. Appendix 1: The Pre-1980 Empirical Literature on Telephone Demand Access, Local Service, and Interstate Toll. Appendix 2: The Pre-1980 Empirical Literature on Telephone Demand Intrastate Toll, WATS and Private Line, Coin, etc. Appendix 3: A Model of Toll Demand. Bibliography. Index.

AN ECONOMETRIC STUDY OF THE DEMAND FOR ACCESS TO THE INTERNET

The increased popularity and explosive growth of the Internet have been widely tracked. A recent Business Week survey estimates that 40 million people are internet users, which is in line with an April 1997 FIND/SVP survey estimate that there are among 40-45 million adult users. 1 These numbers are up sharply from estimates obtained from surveys conducted in the fall of 1996. A November Louis Harris & Associates’ survey, for example, estimated that there were 35 million adult users, while IDC Research estimated that adult users in October 1996 were 31.4 million.2 PNR and Associates’ most recent estimate of households that use the Internet is 16%, which compares with an estimate of 14.8% in 1996. 3 These percentages are consistent with the Harris estimates. Thus, there is ample evidence to support the increased popularity of the Internet and the resulting demand in Internet applications.

Interest and Money

One of the biggest controversies sparked by the General Theory concerned the determination of the rate of interest. Until the General Theory, the generally accepted view was that the rate of interest was determined in the capital market, defined in terms of the demand and supply of savings. The demand for savings was represented by the investment demand function, which depicted a negative relationship between investment and the rate of interest, while the supply of savings was represented by the savings function, which described a positive relationship between the interest rate and the amount saved out of income. The market was assumed to clear at the point where supply equals demand, thereby establishing investment, saving, and the market rate of interest.

Toll price elasticities estimated from a sample of U.S. residential telephone bills

Abstract Demand models for four categories of toll calls are estimated from a sample of U.S. residential telephone bills. Besides the novelty of the data set, innovations in the analysis include the use of a call concentration index constructed from a households itemized individual calls, plus variables representing choice of IX carrier and the presence or absence of an optional calling plan. A principal finding is that price elasticity and call concentration are inversely related.

The demand for commodity packages: The case of telephone custom calling features

The demand for two custom calling services is investigated. The services may be bought individually or in a discounted package. A micro-theory based on discrete choice model is formulated that explicitly accounts for these purchase options. The model is estimated assuming both dependence and independence of the unobservable choice-influencing variables. The estimated parameters are used to simulate the revenue impact of price and discount changes. Copyright 1993 by MIT Press.

IntraLATA long-distance demand: carrier choice, usage demand and price elasticities

Abstract Competition in the long-distance market in the US continues to intensify; the 1996 Telecommunications Act has led to increased competition in long-distance telephony especially as the Regional Bell Operating Companies have begun to gain entry to long-haul, long-distance markets. In order to better understand the implications of having increased service offerings, models of how customers choose between carriers (and the impact of this choice on subsequent usage) will be useful. We develop the first publicly available models that simultaneously estimate choice and usage for intraLATA long-distance in the US. Utilizing a generalized Tobit model, the price responsiveness of usage and carrier choice are estimated. The results are generally consistent with expectations both in terms of theory and of practical experience in the industry.

The Demand for High-Speed Access to the Internet:

The demand for Internet access continues to grow at a dramatic rate. While the primary mode of access has been dial-up service, recent innovations have allowed even residential subscribers the option of obtaining affordable highs-peed or broadband access. In particular, cable television companies have begun to offer cable modems and many local exchange telephone companies are beginning to offer various forms of digital subscriber line (DSL) service. This chapter analyzes the demand for broadband access to the Internet by US households. Using a very large data set of US households with over 32,000 observations, we estimate a discrete-choice model for the demand for Cable Modems. Preliminary elasticity estimates indicate cable-modem Internet access demand to be price-elastic.

Telecommunications demand analysis in transition

The paper focuses on the problems and challenges to applied demand analysis in the telecommunications industry that have been posed by technological change, deregulation and competition. Challenges discussed include the development of new sources of data, estimation of price elasticities which apply to firms and users, the modelling of choice of carrier, and the emergence of the Internet.

Competition in intraLATA long distance: carrier choice models estimated from residential telephone bills

Abstract Competition in the long distance market in the US is at a crossroads. The recent passage of the Telecommunications Act will (eventually) significantly increase competition in long distance telephony. In order to better understand the implications of having more service offerings, models of how customers choose between carriers will be useful. We develop the first publicly available models of intraLATA carrier choice in the US. We find that the results are consistent with expectations — both in terms of theory and practical experience in the industry.

A note on price cap regulation and competition

This paper examines the properties of a price-cap regulatory regime similar in design to a plan recently proposed by AGT Ltd. in hearings on Alternative Forms of Regulation before the Canadian Radio-television and Telecommunications Commission. The price-cap plan incorporates a number of novel features which include (i) quantity weights that evolve through time rather than remaining fixed; (ii) adjustments for productivity that incorporate yardstick competition; and (iii) allowing the weights to reflect the firms market power or absence thereof in the presence of competition. Hence, should competitive circumstances permit, the regulatory regime allows for its own sunset.