Pricing and New Product Options with Telecommunications Competition

Emerging telecommunications competition includes convergence of industries and the removal of barriers to formerly protected markets. Successful entry and protecting existing lines of business mean selecting those markets that will be most profitable to serve. Success will require much more product and price differentiation and targeting to particular customers. This paper describes methods for addressing these needs and summarizes the findings from previous studies. First, firms with a strong brand identity can command a price premium. Second, quality is important in competitive success; indeed, concern for quality has been prominent in the development of rules for balanced competition and interconnection arrangements. Third, offering integrated packages of services (“one-stop shopping” ) can be worth a substantial fraction of price. Finally, firms offering both wholesale and retail services will balance market share loss for the retail service against the possible expansion of the market from a new sales channel offered by firms with potentially high brand