On the Optimality of Fixed-up-to Tariff for Telecommunications Service.

Author List: Masuda, Yasushi; Whang, Seungjin;
Information Systems Research, 2006, Volume 17, Issue 3, Page 247-253.
A tariff is the total charge payable by a customer for services provided. We study the design of tariffs for a telecommunications service provider. We develop an economic model that captures the negative externalities of the network and the diversity of customers. The tariff is designed so that it reflects the expected response of different customers and the system congestion it would induce. We study a simple tariff structure in wide use by mobile phone carriers-a menu of "fixed-up-to (FUT)" plans like "fixed access fee $35 up to 300 minutes, and $0.40 per minute beyond the limit." We derive the optimal menu of FUT plans and show that such a simple FUT menu structure delivers as good performance to the monopolistic carrier as any nonlinear pricing schedule.
Keywords: menu of plans; queuing delays; tariff design
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List of Topics

#195 0.322 pricing services levels level on-demand different demand capacity discrimination mechanism schemes conditions traffic paper resource expected based constraints solution latency
#112 0.227 services service network effects optimal online pricing strategies model provider provide externalities providing base providers fee complementary demand offer derive
#160 0.130 mobile telecommunications devices wireless application computing physical voice phones purchases ubiquitous applications conceptualization secure pervasive differential usability increasing local location
#288 0.095 customer customers crm relationship study loyalty marketing management profitability service offer retention it-enabled web-based interactions operations sales strategy channels set
#182 0.073 percent sales average economic growth increasing total using number million percentage evidence analyze approximately does business flow annual book daily