gast@CS.UCLA.EDU (David Gast) (01/18/89)
One of the things that bothers me about the current pricing for phone
service is that phone costs are becoming more constant 24 hours per
day.
It costs the phone company almost nothing to complete a phone call.
Almost all of their costs are in fixed costs, mostly capacity costs
for installing the equipment. Each individual call at the margine
that is completed and billed for is almost pure profit. (It is
business that wants all of the new services and equipment, the phone
system of 10 years was technologically fine for transmitting voice).
The heaviest demand for calls is Christmas and Mother's Day. Other than
these special days, the heaviest demand for phone service is during
the business day, which is why phone service has traditionally cost
more during the day, than at night. Since the circuits are usually
idle during the night (unless usage patterns have changed significantly
during the past couple years), it would be most fair to charge almost
nothing during those hours. The hours with the highest demand should
have higher rates than now in order to encourage people to call at non-
peak times. (The overall costs of phone service would decline if that
were the case since less capacity would be needed to handle the same number
of calls).
In reality, however, costs are becoming more equalized, not less so.
Services like 900 numbers cost the same no matter what the time of day
they are called. The access charge is the same whether you call at
peak or non-peak hours. (Business may refuse to pay that charge;
residential customers cannot). Reach out America plans charge the same
for calls during the evening and night periods. The last I checked
there was no Reach Out America Night Plan, but there are discounts
during the peak, daytime period available. AT&T's new tariff allows
them to discount their telephone rates below their standard rates
to business customers in order to be competitive, but they did
ask to have the same ability to cut rates for residential customers.
Finally, the night discount has been reduced as a percentage of the
daytime rate. (The cost of completing a call at night has gone up
because the decrease in the discount has not been offset by declines in
the base rate. In fact, for many carriers, the base rate has been
increasing, not decreasing).
These changes have all helped the business customer (who deducts the
cost of his phone service) and harmed the residential customer (who
cannot). Thus, on an after-tax basis, the business customer calling
during peak times may actually pay less for phone service than a
residential customer who calls during hours with lower utilization of
capacity. (I am assuming that the length and the location of the calls
is the same).
The reason given is that otherwise large businesses would set up their own
telephone systems. The entire reason for the existence of the telephone
monopoly in the first place, however, was that due to economy of scale,
one large company could be much more efficient (and thus have lower prices)
than smaller companies. To the extent that such economies of scale exist
today, smaller companies should be unable to provide phone service cheaper
than a large one. If there are no economies of scale, then we should expect
to see more and more companies rather than the mergers of the past few
years. And regardless, those companies would still have all of that unused
capacity at night and on weekends, which they could sell very cheaply.
It is easy to see who has more lobbying power. Businesses, who cannot vote,
are more succesful than individuals who can.
David Gast
gast@cs.ucla.edu
{uunet,ucbvax,rutgers}!{ucla-cs,cs.ucla.edu}!gasturlichs@smurf.ira.uka.de (Matthias Urlichs) (11/26/89)
In comp.dcom.telecom motcid!horwath%cell.mot.COM@uunet.uu.net (George Horwath)
writes:
< [ calling the US from East Germany ] After the call, the operator called
< back with the charges which I had to pay immediately. It was around
< 35(!) East German marks for a 25 minute call. At the official exchange
< rate (1 East German mark = 1 West German mark) that was roughly $18!
(The inofficial rate is about 1:10 now, which makes that $1.80.)
So what? If you had called from West Germany, you could have dialled
direct, the line would have been somewhat better, and you would have
paid DM 84 for these 25 minutes, or about $40.
Which tells you something about the (West) German Bundespost.
Side remark: Suppose it's 11:00 here in Karlsruhe, Germany. What is
cheaper: Call me from Munich (200 miles) or San Francisco (a whole lot
of miles)? You guessed right; the intra-German call will be about
$28/hour. :-( :-( :-(
Next time I have to call someone in the US, I'll do it from East
Germany, that way it will be cheaper. ;-) )
Matthias Urlichs, Humboldtstrasse 7, 7500 Karlsruhe 1, FRG
urlichs@smurf.ira.uka.de