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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

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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 ...)






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