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International performance indicators telecommunications
270
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regulator uses information on the firm’s observed costs and output in one time period to constrain the firm’s pricing choices in the following period. Although the firm moves, over time, to Ramsey prices, this proposal raises a host of strategic issues for the firm. Sappington pointed out, for example, that the firm might, under certain conditions, have an incentive to waste inputs in each period prior to reaching equilibrium. Chapter 6 deals with surplus subsidy schemes. For example, Loeb and Magat have proposed a mechanism that induces the firm to charge the optimal price and produce efficiently, even when the regulator does not know the firm’s cost. The problem is that the regulator could easily establish a subsidy that is far larger than what is needed to induce the firm to behave optimally. Chapters 7-9 deal with several concepts of ideal public utility pricing, taking marginal cost pricing as a reference point. In particular multi-part tariffs, time-of-use prices and self-selecting tariffs are considered. In a way these chapters could also serve as part of a separate course called public utility pricing. Finally, chapter 10 focuses on the role of potential entry as a substitute for regulatory mechanisms. Since regulatory actions cause significant (direct or indirect) costs, this chapter is of particular importance and should be a natural starting point of every course on regulatory analysis. The purpose of this book is to present the basic theoretical concepts in a form that elucidates the driving forces behind the results while using minimum technical apparatus. Train’s book is well suited for parts of undergraduate and graduate courses on the economics of regulation, although graduate students should combine it with the original articles in order to get more complete rigor. In addition, it may serve as a source of inspiration for everyone involved in the economics of regulation. G. Knieps Albert-Ludwigs-Universitat Freiburg i. Br. Germany
International Performance Indicators Telecommunications, Research Report 48 (Bureau of Industry Economics, Australia) This study report provides useful new performance indicators for measuring the value of the telecommunications services sector to the macro economy of Australia. Its terms of reference were to identify the competitiveness of Australian companies in global markets and to determine how far the telecommunications infrastructure contributed to their competitive advantage.
Book
Reviews
271
The report starts out by giving very clear-cut definitions of basic and value-added services, illustrated with diagrams and charts. In the second chapter, the book outlines succinctly the theories of regulation and the regulatory framework of Australian telecommunications services. For example, it describes the role of AUSTEL in determining the interconnect charges for new entrants so that charges are fair for both Optics and the incumbent carrier. These developments are examined against prevailing regulations in Asia, Japan, Europe, and the United States. The Australian market environment is analyzed against the changes introduced in 1990 when Telecom and OTC were merged to form the AOTC (Australian and Overseas Telecommunications Corporation). A carrier duopoly has been established like the one in Britain; AUSSAT was sold to the second carrier. This duopoly will be changed to full competition in 1997. Comparative data are provided in diagrams to show that Australia’s telecommunications sector contributes 2.92% to GNP, compared with 3.26% in the U.S. and 2.39% in the U.K. Industry input/output tables were used to measure the interdependencies that exist between industries (forward and backward linkages). However, the data provided are for the years 1986-87 and 1987-88. Perhaps it was difficult to update these tables, but use of a more recent social accounting matrix would have given a better picture of the telecommunications sector’s impact on overall competitiveness. The study provides a useful analysis of user satisfaction from the services. The criteria for evaluation used in the study are price, quality of service, and reliability. The perspective is that of industrial users and households. In this part of the work, more recent 1992 data are used for estimating international comparisons of PSTN charges as well as tariffs for mobile services. For leased line charges, Australia’s prices are the lowest for 64 kilobits per second lines. In its efforts to improve the infrastructure to the state-of-the-art, Australia has been slow in its digitalization of networks and carries on with analogue switches. However, it hopes to supply digital equipment to 56% of its exchange lines by 1995. Technical efficiency as a performance indicator is measured through linear programming, which calculates the potential output at best practice for a telecom service. It is based on input and output data. Using this methodology, Sweden and the U.K. come closest to Australia in technical performance. On the whole, this report is a brief compendium of the relevant statistics of the telecommunications industry in Australia. It analyzes the industry’s performance against an international background of OECD countries. The report would have been more useful if it had included data from the Asia-Pacific countries in view of the leadership taken by Australia in the
272
Book
Reviews
formation of the Asia-Pacific Economic Cooperation Council. If Australia is to become a major player in the telecommunications arena, it should measure its success against that of its Asian partners like Singapore, Taiwan, Hong Kong, and South Korea. The significant growth in markets in the next decade will be in the Asia-Pacific region, where vendors from the U.S., Canada, and Europe, will be vying for market share. Meheroo Jussawalla East-West Center Honolulu, HI U.S.A.
Bruce L. Egan, 1991, Information Superhighways: The Economics of Advanced Public Communication Networks (Artech House, Boston) ix + 187 PP. The publication of Information Superhighways could not have occurred at a more opportune time. This compact monograph deals with a subject matter that lies at the heart of the new Clinton administration economic plan for national telecommunications development, viz. boosting the investment in fiber optic technology that could enable the carriage of massive amounts of digital information on a national scale. Since most of the new infrastructure development programs to date have been driven by state policymakers in the US, it remains to be seen whether the Clinton initiative would help galvanize a coordinated policy approach at the federal level. Egan’s monograph focuses on what might be termed the political economy of universal broadband networks (UBNs). The ‘blue sky’ engineering vision of the UBN concept conjures images of an integrated and interactive multimedia platform built on a digitized and high-speed all-fiber backbone. Such visions abound in the trade press and popular media of the techno-enthusiasts. Although Egan succumbs occasionally to the thetoric of this futuristic view, his rendition of the UBN concept is on the whole firmly anchored on the pragmatic issues of technology adoption and deployment under the current institutional and regulatory environment of the US. On this score, Information Superhighways should strike a chord with those who have to make the decisions and formulate the policies for the transition to the next era of digitized telecommunications. The monograph is organized into short and fairly self-contained chapters, the first two of which provide background on broadband technology and likely scenarios for future network configurations. The following chapter contains a rather terse presentation of the economics of a ‘feature-rich’
Book
Reviews
regulator uses information on the firm’s observed costs and output in one time period to constrain the firm’s pricing choices in the following period. Although the firm moves, over time, to Ramsey prices, this proposal raises a host of strategic issues for the firm. Sappington pointed out, for example, that the firm might, under certain conditions, have an incentive to waste inputs in each period prior to reaching equilibrium. Chapter 6 deals with surplus subsidy schemes. For example, Loeb and Magat have proposed a mechanism that induces the firm to charge the optimal price and produce efficiently, even when the regulator does not know the firm’s cost. The problem is that the regulator could easily establish a subsidy that is far larger than what is needed to induce the firm to behave optimally. Chapters 7-9 deal with several concepts of ideal public utility pricing, taking marginal cost pricing as a reference point. In particular multi-part tariffs, time-of-use prices and self-selecting tariffs are considered. In a way these chapters could also serve as part of a separate course called public utility pricing. Finally, chapter 10 focuses on the role of potential entry as a substitute for regulatory mechanisms. Since regulatory actions cause significant (direct or indirect) costs, this chapter is of particular importance and should be a natural starting point of every course on regulatory analysis. The purpose of this book is to present the basic theoretical concepts in a form that elucidates the driving forces behind the results while using minimum technical apparatus. Train’s book is well suited for parts of undergraduate and graduate courses on the economics of regulation, although graduate students should combine it with the original articles in order to get more complete rigor. In addition, it may serve as a source of inspiration for everyone involved in the economics of regulation. G. Knieps Albert-Ludwigs-Universitat Freiburg i. Br. Germany
International Performance Indicators Telecommunications, Research Report 48 (Bureau of Industry Economics, Australia) This study report provides useful new performance indicators for measuring the value of the telecommunications services sector to the macro economy of Australia. Its terms of reference were to identify the competitiveness of Australian companies in global markets and to determine how far the telecommunications infrastructure contributed to their competitive advantage.
Book
Reviews
271
The report starts out by giving very clear-cut definitions of basic and value-added services, illustrated with diagrams and charts. In the second chapter, the book outlines succinctly the theories of regulation and the regulatory framework of Australian telecommunications services. For example, it describes the role of AUSTEL in determining the interconnect charges for new entrants so that charges are fair for both Optics and the incumbent carrier. These developments are examined against prevailing regulations in Asia, Japan, Europe, and the United States. The Australian market environment is analyzed against the changes introduced in 1990 when Telecom and OTC were merged to form the AOTC (Australian and Overseas Telecommunications Corporation). A carrier duopoly has been established like the one in Britain; AUSSAT was sold to the second carrier. This duopoly will be changed to full competition in 1997. Comparative data are provided in diagrams to show that Australia’s telecommunications sector contributes 2.92% to GNP, compared with 3.26% in the U.S. and 2.39% in the U.K. Industry input/output tables were used to measure the interdependencies that exist between industries (forward and backward linkages). However, the data provided are for the years 1986-87 and 1987-88. Perhaps it was difficult to update these tables, but use of a more recent social accounting matrix would have given a better picture of the telecommunications sector’s impact on overall competitiveness. The study provides a useful analysis of user satisfaction from the services. The criteria for evaluation used in the study are price, quality of service, and reliability. The perspective is that of industrial users and households. In this part of the work, more recent 1992 data are used for estimating international comparisons of PSTN charges as well as tariffs for mobile services. For leased line charges, Australia’s prices are the lowest for 64 kilobits per second lines. In its efforts to improve the infrastructure to the state-of-the-art, Australia has been slow in its digitalization of networks and carries on with analogue switches. However, it hopes to supply digital equipment to 56% of its exchange lines by 1995. Technical efficiency as a performance indicator is measured through linear programming, which calculates the potential output at best practice for a telecom service. It is based on input and output data. Using this methodology, Sweden and the U.K. come closest to Australia in technical performance. On the whole, this report is a brief compendium of the relevant statistics of the telecommunications industry in Australia. It analyzes the industry’s performance against an international background of OECD countries. The report would have been more useful if it had included data from the Asia-Pacific countries in view of the leadership taken by Australia in the
272
Book
Reviews
formation of the Asia-Pacific Economic Cooperation Council. If Australia is to become a major player in the telecommunications arena, it should measure its success against that of its Asian partners like Singapore, Taiwan, Hong Kong, and South Korea. The significant growth in markets in the next decade will be in the Asia-Pacific region, where vendors from the U.S., Canada, and Europe, will be vying for market share. Meheroo Jussawalla East-West Center Honolulu, HI U.S.A.
Bruce L. Egan, 1991, Information Superhighways: The Economics of Advanced Public Communication Networks (Artech House, Boston) ix + 187 PP. The publication of Information Superhighways could not have occurred at a more opportune time. This compact monograph deals with a subject matter that lies at the heart of the new Clinton administration economic plan for national telecommunications development, viz. boosting the investment in fiber optic technology that could enable the carriage of massive amounts of digital information on a national scale. Since most of the new infrastructure development programs to date have been driven by state policymakers in the US, it remains to be seen whether the Clinton initiative would help galvanize a coordinated policy approach at the federal level. Egan’s monograph focuses on what might be termed the political economy of universal broadband networks (UBNs). The ‘blue sky’ engineering vision of the UBN concept conjures images of an integrated and interactive multimedia platform built on a digitized and high-speed all-fiber backbone. Such visions abound in the trade press and popular media of the techno-enthusiasts. Although Egan succumbs occasionally to the thetoric of this futuristic view, his rendition of the UBN concept is on the whole firmly anchored on the pragmatic issues of technology adoption and deployment under the current institutional and regulatory environment of the US. On this score, Information Superhighways should strike a chord with those who have to make the decisions and formulate the policies for the transition to the next era of digitized telecommunications. The monograph is organized into short and fairly self-contained chapters, the first two of which provide background on broadband technology and likely scenarios for future network configurations. The following chapter contains a rather terse presentation of the economics of a ‘feature-rich’