International Telecom Settlements: Gaming Incentives, Carrier Alliances, and Pareto-Suerior Reform

David A. Malueg () and Marius Schwartz ()
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David A. Malueg: Department of Economics and the A.B. Freeman School of Business, Tulane University
Marius Schwartz: Department of Economics, Georgetown University

Working Papers from Georgetown University, Department of Economics

Abstract: Liberalized countries that allow competition in international telecommunications favor traffic re-routing practices as arbitrage against foreign monopolists. This view is seriously incomplete. Monopolists, allied with carriers in liberalized countries, can use these practices to reduce termination payments to nonalliance carriers-thereby harming also consumers in liberalized countries -by gaming regulations that require equal termination rates at both ends and 'proportional return' (the monopolist's traffic is allocated among carriers in proportion to their shares of traffic to its country). We also present a simple bilateral settlements reform that eliminates gaming incentives and other proportional-return distortions, yet benefits both countries.

Keywords: International Telecom; Termination Payments; Alliances (search for similar items in EconPapers)
JEL-codes: L13 L51 L96 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2001-08-09
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