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more on Competition sends phone rates up
From: David Farber <dave () farber net>
Date: Thu, 13 Apr 2006 18:40:37 -0400
Begin forwarded message: From: "Faulhaber, Gerald" <faulhabe () wharton upenn edu> Date: April 13, 2006 8:26:58 AM EDT To: David Farber <dave () farber net> Subject: RE: [IP] Competition sends phone rates up Rosenberg is right, of course. How the original writer could think that a market with a regulator setting prices could be competitive stumps me. The subject "competition sends phone rates up" is silly; it is the regulator that sent phone rates up, as is crystal clear from the story. Unfortunately, the rate increase will cause those customers who are most price-sensitive to bail on Verizon and Frontier, thus reducing their share. But customers who aren't really paying attention will be socked with the increase. My guess is that Verizon will try to target increases (if any) to customers who are not price sensitive. As we say, caveat emptor. Professor Gerald Faulhaber Business and Public Policy Dept. Wharton School, University of Pennsylvania Philadelphia, PA 19104 Professor of Law University of Pennsylvania -----Original Message----- From: David Farber [mailto:dave () farber net] Sent: Thursday, April 13, 2006 7:10 AM To: Faulhaber, Gerald Subject: Fwd: [IP] Competition sends phone rates up Begin forwarded message: From: Bob Rosenberg <bob () bobrosenberg phoenix az us> Date: April 12, 2006 11:55:49 PM EDT To: dave () farber net Cc: people () addventure com, 4whp () insightbb com Subject: Re: [IP] Competition sends phone rates up Dave, et. al. Perhaps for IP. This is economic lunacy! The price elasticity demand curve works well in this market (whether regulated or competitive). Raise prices: Lose market share. Lower prices: Increase market share. By granting a rate increase in the instant case, the Commission will cause Verizon and Frontier to continue losing customers -- This rate increase will simply accelerate that process. Cordially, Bob Rosenberg P.O. Box 33023 Phoenix, AZ 85067-3023 LandLine: (602)274-3012 Mobile: (602)206-2856 bob () bobrosenberg phoenix az us ********************************************** "Education's purpose is to replace an empty mind with an open one." Malcolm Forbes ********************************************** Begin forwarded message: From: Randall <4whp () insightbb com> Date: April 12, 2006 1:34:53 PM EDT To: dave () farber net Cc: people () addventure com Subject: Re: [IP] Competition sends phone rates up On Wed, 2006-04-12 at 13:29 -0400, David Farber wrote: [Hide Quoted Text] Begin forwarded message: From: Allen Firstenberg <people () addventure com> Date: April 12, 2006 9:53:30 AM EDT To: David Farber <dave () farber net> Subject: Competition sends phone rates up Dave, For IP if you wish. Perhaps someone can explain the economics of this. http://www.pressconnects.com/apps/pbcs.dll/article?AID=/20060412/ BUSINESS/604120325/1002 N.Y. regulators approve telephone rate increase About halfway though, we see this gem of a paragraph: "The commissioners and PSC staff members said the companies need the 'flexibility' to raise rates because they're losing customers rapidly to wireless phones, cable companies and other competitors. Verizon has lost 3 million customers in the past five years and Frontier has lost 18 percent of its customers in the last three years, according to the commission." Aren't we always promised that competition should lower prices? That's in a free market, which is not what we're dealing with here. This is a regulated utility, which by statute is allowed to recover its costs plus a "reasonable" profit from the ratepayers. Fewer ratepayers, with the same fixed costs, means each ratepayer pays more. (CEO salary is surely part of the "fixed costs", which the ever-shrinking number of ratepayers must cover. Betcha he didn't take a pay cut ...) ------------------------------------- You are subscribed as lists-ip () insecure org To manage your subscription, go to http://v2.listbox.com/member/?listname=ip Archives at: http://www.interesting-people.org/archives/interesting-people/
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