What Types of Regulatory and Pricing Strategies Work When Customers are Likely to Become Competitors?

Victor Glass, Rutgers, The State University of New Jersey - Rutgers Business School and Timothy J. Tardiff, Advanced Analytical Consulting Group ask What Types of Regulatory and Pricing Strategies Work When Customers are Likely to Become Competitors?

ABSTRACT: Business Data Services (BDS), formerly called special access services, are dedicated broadband lines offered by network providers to business customers and network providers. In a packet-based broadband network, the distinction between customer and competitor is being blurred, and with it the meaning of the wholesale/retail distinction. A new approach to pricing and regulatory oversight is needed that moves away from treating any market segment as passive purchasers of BDS services. The authors propose a simple pricing structure that is cost-causative, reflects the opportunity cost of using the network, and controls opportunistic behavior. While the main focus of the paper is on BDS services, the recommendations also hold in other networks industries.