Topics on the economics of international telecommunications

This thesis comprises three essays of the economics of international telecommunications. The first of the essays is concerned with the modeling of international telephone demand. Standard models of international telecommunications demand have exclusively focused on modeling the total demand for telephone minutes and ignored call durations as a separate dimension of calling behavior. Yet, average call durations and total volume of telephone traffic have developed in opposite directions over the past decade, suggesting that it is important to clarify the relationship between call duration and total traffic volume. This essay extends traditional telephone demand analysis to show how to handle call durations in the Point-to-Point telephone demand model, and presents estimation results using data of telephone traffic between the US and 42 countries. The remainder of this thesis analyzes the regulatory history of the Proportionate Return Requirement (PRR) and its effect on the US telephone markets and industry. The second essay is an institutional analysis of the PRR in the context of United States' regulation of international telephony. The main conclusion is that the actual effect of the PRR is not in line with its regulatory objectives, and that the PRR is not needed to prevent "whipsawing" of US carriers by foreign monopolists. The FCC's justifications of the PRR are found to be largely based on an erroneous interpretation of historic case law. The third essay, finally, attempts to provide an insight into the nature of economic distortions created by the PRR. It develops a competition model of an international telecommunications market with two types of carriers, facilities-based and resale carriers. The model is used to analyze and simulate the effect of the proportionate return requirement (PRR) on the existence and properties of equilibria in the country where the PRR is implemented. In addition, this model analyzes the discriminatory effect of the PRR on resellers, and the extent to which facilities-based carriers can use the advantage of receiving incoming traffic to increase their market share at the expense of resellers in the end-user market.Business, Sauder School ofStrategy and Business Economics, Division ofGraduat