Economic issues in usage-sensitive pricing
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Two central economic considerations confront regulators and telephone companies considering usage-sensitive (measured-service) pricing of local telephone service: determining when measured rates are desirable and establishing principles for designing them. Measured rates will be desirable on allocative grounds when they increase the net efficiency of the economic resources used to produce telephone service. The principles for designing them must apply to structure and level, and whether the rate will be mandatory or offered as an option to a conventional flat rate. The paper examines issues of allocative efficiency and rate design for local measured service.
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