Re: a pricing model?? and local phone service

[David Farber <dave () farber net>]

________________________________________
From: Sam Simon [ssimon () amplifypublicaffairs net]
Sent: Monday, June 16, 2008 10:42 AM
To: David Farber; ip
Subject: RE: [IP] Re:    a pricing model??

Actually Dave, the argument goes back to the old phone company effort to
charge by the minute for local phone service.

The old telephone company issue in fact was local service.  When ATT was
"the phone company" it launched a nationwide campaign to get every state
to adopt "Local Measured Service."  (LMS)  The original proposal was to
meter every call.  It was rejected in all but a few states.  Eventually
ATT/Bell moved to offering a low monthly rate/measured option, which is
available today but hardly ever used by consumers.  And measure is
usually per-call, not per-minute.

Consumer groups lead the fight against LMS.  ATT's argument was that the
heavy users were the cost causers.  Most independent studies done at the
time however argued that it was only peak use that had a cost impact.
The argument was that the marginal cost of one phone call was or
approached zero, unless it pushed peak demand.  The studies  also looked
at whether the cost of measuring out-weighed the benefit of time
shifting or demand suppression. As I recall it, most said it was likely
a wash.

In my view the best work done on this was by Bridger Mitchell when he
was Rand.  Here is a reference http://www.rand.org/pubs/papers/P6495/ to
one of his papers on the topic. " Alternative measured-service rate
structures for local telephone service"

Sam



-------------------

Samuel A. Simon

Chairman, Amplify Public Affairs, LLC

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------Original Message-----
From: David Farber [mailto:dave () farber net]
Sent: Monday, June 16, 2008 10:05 AM
To: ip
Subject: [IP] Re: a pricing model??


________________________________________
From: Tice DeYoung [ticed () bellatlantic net]
Sent: Monday, June 16, 2008 9:41 AM
To: David Farber; ip
Cc: Tice DeYoung
Subject: Re: [IP] a pricing model??

Dave,

    What goes around seems to always come back again.  Charging by the
bit smacks of the old phone company's charge by the minute for long
distance.  The metering ate up about eighty percent of the operating
costs, hardly cost effective.  Richard could explain this better.

Tice


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