10 May2010

How the NBN Implementation Study stacks up

Posted in Telecommunications

Henry comments in CommsDay (10 May 2010) on the McKinsey-KPMG Implementation Study of the NBN.

"The Implementation Study is clearly a serious piece of work that provides a wealth of information and analysis relevant to an assessment of the NBN proposal. By and large, the Study is of high quality. However, its results are based on strong, often not well justified, assumptions, there are some seeming errors in the analysis...."

Read the full article here, or download the pdf by clicking the filename below.

Download
HENRY_ERGAS_COMMENT__NBN.pdf
13 Jun2009

Time Consistency in Regulatory Price Setting: An Australian Case Study

Posted in Telecommunications

Time consistency refers to situations where a policy that is optimal ex ante proves not to be optimal ex post, creating the risk of opportunistic policy reversals. While the threat of such reversals has received widespread attention in the theoretical literature, testing whether policy is indeed time consistent is challenging. This paper implements such a test by comparing the depreciation profile established by the Australian 268 regulator at the outset of a regulatory period with the actual path of allowed recovery, and finds that the regulator acted in a time-inconsistent manner.

Download
Time_Consistency_in_Regulatory_Price_Setting.pdf
11 Feb2009

Asymmetric termination charges to support small networks

Posted in Telecommunications

Termination charges toward newer entrants are often set asymmetrically to exceed efficient costs for telephony traffic. Such practices are said to be beneficial to consumers as well as providing competition a “leg-up”. However claims of consumer benefit are dubious at best, while infant industry arguments are no more likely to apply to 268 than they apply anywhere else. Appropriate forms of termination regulation are then considered.

Download
AsymmetricTermination20090203.pdf
29 Oct2008

An Optimal Policy Framework for a New Broadband Network

Posted in Telecommunications

While there are at least seven full facility-based broadband competitors, competitive facility-based fixed line investments appear to be declining in favour of use of Telstra’s network. It also appears that no carrier is presently willing to make significant fixed broadband investments without substantial regulatory commitments and protections relative to those currently available.

Download
ErgasRalph2008_Optimal_NBN_framework_long.pdf
24 Jan2008

Telecommunications access pricing: The Australian experience

Posted in Telecommunications

Few issues have been as controversial in Australia as the setting of access prices in 268. This paper provides a survey of the Australian experience in that regard. It shows that:
  1. Access charges have been set in a way that does not respect "adding up" constraints, and notably the requirement for full cost recovery;
  2. The resulting shortfalls have been increased by distortions in relative prices between substitutable services;
  3. The failure to allow recovery of even "efficient" costs has bee aggravated by decisions by the ACCC that plainly involve "time inconsistency", i.e. that amount to expropriation of the sunk capital of investors in the access provider; and
  4. The distortions associated with thus setting the level of access charges incorrectly have been accentuated by very steep rates of decline in access charges that far exceed any reasonable estimate of the rate of reduction in costs.

 

Download
Telecommunications_access_pricing_080126.pdf

10 Jul2004

Telecommunications: Competition Regulation and Communication via the Internet

Posted in Telecommunications

In this presentation, Henry argues for a drastic simplification of the 268 access arrangements in the emerging 268 environment. He posits that current regulatory arrangements, as reflected in the access regime are not at all well suited to the emerging 268 environment and that regulatory interventions have the potential to seriously distort that transformation.

Henry offers his vision of the emerging 268 environment and outlines the deficiencies of the current 268 access regime. He argues that the transition to a broadband world provides important impetus for, and the opportunity to make changes.

Continue Reading

10 Sep2003

Quantifying differences between broadband penetration rates for Australia and other countries

Posted in Telecommunications

The issue of broadband internet access is an important one for public policy makers in Australia and elsewhere. Broadband internet access has grown very rapidly in the last few years, however penetration rates appear to be very uneven across OECD countries. This has raised questions about the nature of the competitive, regulatory and policy environment in OECD countries and the possible influence on penetration rates.

Download
broadband_diffusion _final_2_10_03.pdf
11 Aug2002

Technological change and regulatory approaches to an Australia-United States Free Trade Agreement

Posted in Telecommunications

In an address to the National Press Club in Canberra, Henry Ergas explored the benefits and ways of pursuing a free trade agreement between the United States and Australia. Such a bilateral agreement encompassing sound competition policy and regulation would not only enhance efficiency domestically, but it could also secure the gains of trade liberalisation.

Download
speech-ergas-fta-aug02.pdf
13 Jan2000

Telecommunications Issues in Market Definition

Posted in Telecommunications

New Part XIB of the Trade Practices Act 1974 (Cth) (the TPA) gives the Australian Competition and Consumer Commission (the ACCC) new powers to control anti-competitive conduct by carriers and carriage service providers. In using these powers, and specifically when issuing a Competition Notice1 or making a tariff filing direction, the ACCC will have to form a view about the 268 markets in which these industry participants operate. Thus, in issuing a tariff filing direction, the ACCC must be satisfied that the person to whom it is to be directed has a substantial degree of power in a 268 market.

Download
papers_ergas_telecomunications_ issues_1998.pdf
13 Jan2000

Valuation and costing issues in the ACCC's guidelines for 268 access pricing

Posted in Telecommunications

Normatively, regulation can be viewed as an implicit or explicit contract between the regulatory authority, consumers and the regulated supplier(s) The essence of this contract is that the authority, acting as a consumer agent, commits to setting prices on a basis which recoups the long-run costs of efficient supply, where efficient supply is defined with reference to that which would prevail were the market at issue contestable. This, in turn, implies that the supplier derives a stream of residual income dependent on the costs it incurs relative to the prices which would be established under contestability.

Download
papers-ergas-valuation.PDF
13 Jan2000

Telecommunicationcs across the Tasman

Posted in Telecommunications

The reform of 268 regulations began at virtually the same time in New Zealand and Australia. In New Zealand, the first serious steps were taken in 1986 with the commissioning by the 264 of the Mason-Morris report into the operations of the Post Office In Australia, the 264 initiated a review of 268 arrangements some eight months later Close geographical proximity, the near simultaneity of the processes, and the fact that at the time both countries had Labor 264s did not, however, mean that similar outcomes eventuated.

In New Zealand, the 264 set out on a course of rapidly removing all statutory constraints on entry and competition into the industry. Although the Mason-Morris report had only supported liberalisation of Customer Premises Equipment (CPE) and Value Added Services (VAS), a follow-up report advised that full liberalisation was feasible and desirable.

Download
papers-ergas-outcomes.PDF
13 Jan2000

International trade in 268 services: an economic perspective

Posted in Telecommunications

This paper is structured around six propositions. These are: Historically, international 268 services have been provided cooperatively by national 268 entities each supplying service on a monopoly basis within its national territory. While these cooperative arrangements have made some sense as a means of reducing transactions costs, they have been vulnerable to severe distortions, notably in terms of the process of international settlement.

Download
papers-ergas-InTrade.PDF
13 Jan2000

Declaration of GSM roaming: An economic analysis

Posted in Telecommunications

The question at issue is whether the service of GSM Roaming should be declared. The relevant criterion is whether declaration would promote the long term interests of end-users. To examine this issue, this note focuses on two questions.

The first is whether there is evidence that current competition in the supply of mobile services is in some respect inadequate – so that there is scope for regulatory intervention to improve on matters.

The second is whether – even were current competition inadequate – mandatory roaming would be likely to yield better outcomes than would otherwise prevail.

Download
papers-ergas-roaming.PDF
13 Jan2000

TSLRIC, TELRIC and other forms of forward-looking cost models in 268: a curmudgeon's guide

Posted in Telecommunications

A paper prepared for the 1998 EU Competition Workshop at the Robert Schuman Centre of the European University Institute.

Download
papers-ergas-tslric-final-nov98.pdf
13 Jan2000

The Todd Report on Competition in New Zealand 268: A critique

Posted in Telecommunications

The Todd Consortium has produced a report ('the Clear report') that seems reasonable, but that on closer examination proves not to be. It relies on strong assumptions, most of which it fails to document, to make its point. Vary these assumptions, and the report’s results fall away. This is hardly a robust basis for deriving strong conclusions – yet the Consortium would have New Zealand make drastic changes on that basis.

Download
papers-ergas-todd.pdf
13 Jan2000

Internet peering: A case study of the ACCC's use of its powers under Part XIB of the Trade Practices Act, 1974

Posted in Telecommunications

On May 27, 1998, the Australian Competition and Consumer Commission ('ACCC') determined that certain conduct by Telstra in the supply of Internet services constituted a contravention of the Competition Rule pursuant to s151AJ(2) of the Trade Practices Act, 1974 ('the Act'). A Competition Notice was consequently issued, and was to come into force on June 5, 1998. 1 This was the first such Notice issued. The Notice specified the conduct allegedly in contravention of the Competition Rule as follows.......

This paper examines the background to and effects of the Competition Notice. The structure of the paper is as follows. First, the legislative background is set out (section B). This is followed by a brief introduction to the Internet (section C) and to interconnection arrangements in the Internet (section D). Section E examines the relevant markets and whether Telstra had power in those markets. Section F considers whether the conduct involved taking advantage of market power, section G whether it had an anti-competitive effect and section H whether the remedies promoted or lessened competition. Section I concludes.

Download
papers-ergas-peering-may99.pdf
13 Jan2000

Economic depreciation in 268 cost models

Posted in Telecommunications

Forward-looking cost models are playing an increasingly important role in setting and assessing access prices and determining universal service costs in Australia’s 268 industry. Both the ACCC and the ACA have recently commissioned large consultancy projects to estimate the forward-looking costs of Telstra’s network. In such models, depreciation usually accounts for a large proportion of total costs, and hence the appropriate method for estimating depreciation has been the focus of considerable attention by both regulators and industry operators.

Rather than the use of accounting depreciation, which simply allocates the historic cost of the asset over the periods which it is to be used, depreciation in forward-looking cost models should reflect the period on period decline in the market value of the asset – a concept known as economic depreciation. While it can be shown that under specific conditions accounting depreciation aligns with economic depreciation, these are not the conditions under which 268 operators in Australia are required to operate. Rather, competition and short duration contracts mean that the profile of depreciation is critical to meeting a firm’s dual objectives of remaining competitive and recovering capital costs.

This paper identifies the difference between accounting and economic depreciation and shows that the regulatory and competitive state of Australia’s 268 market makes the latter the appropriate for use in forward-looking cost models.

Download
papers-hardin-ergas-small-IECecondepreciation-jul99.pdf

NAVIGATION

  • Home
  • Op eds
  • Henry's blog
  • Events
  • All sector reports / Papers
  • Competition policy
  • Defence economics
  • Economics of aged care
  • Economics of regulation
  • Energy
  • Environmental economics
  • Financial services
  • Government
  • Health economics
  • Infrastructure
  • Intellectual property
  • Media
  • Telecommunications
  • Terms and conditions
  • About us
  • Subscribe
  • Privacy policy
  • Contact Us

Search

GraphicMail Subscription Form

Please enter a valid email address for the following mailing list.
New_Papers_and_Reports
Email Address :

  • Home
  • Op eds
  • Henry's blog
  • Events
  • All sector reports / Papers
  • Competition policy
  • Defence economics
  • Economics of aged care
  • Economics of regulation
  • Energy
  • Environmental economics
  • Financial services
  • Government
  • Health economics
  • Infrastructure
  • Intellectual property
  • Media
  • Telecommunications
  • Terms and conditions
  • About us
  • Subscribe
  • Privacy policy
  • Contact Us