A report by Yankee Group Europe suggests European telecommunication pricing will move towards cost-based tariffs over the next five years, leading to major difficulties for regulators. Tariffing In The Age Of Abundance notes that in the past four years the prices of circuit-switched services and basic bandwidth have fallen steadily, but at nothing like the rates costs have dropped. Over the next four years, the study argues, current trends will ‘strengthen markedly’ and the fall in prices is likely to be very rapid for large users, especially in countries that still have relatively high tariffs. The Group says it expects to see many current anomalies in tariffs, such as different prices at two ends of a link, disappear. However, as price wars become real, carriers can be expected to work harder to get prices into balance with costs and more importantly, cut costs in general, finds the report. In turn this is likely to result in greater discounts and packages, which will become more widely available and more complex over the next four years. Users’ bills may fall by up to 75% in some cases between 1993 and 1997, it guesstimates. Discounts and packages though, while clearly in the interests of some users, will present major dilemmas to regulators, says the company. Many of the commercial imperatives now driving tariff innovation, such as packaging, discounting, special offers, demand-based pricing and negotiated one-off deals, run counter to European legislation. In particular, predatory and discriminatory pricing designed to freeze out competition are major dangers. Yankee Group says this is likely to be a dominant issue in regulation for the next decade. Meanwhile, carriers will have to decide how to take account of other changes in services and technology; they will have to decide on the optimal balance between flat-rate and usage-based tariffing. Both methods are defensible on cost- and demand-based grounds, and carriers will need to test the market to find the right balance between fixed and variable pricing, concludes the report.
