The success of broadband services such as multimedia applications and electronic commerce relies on telcos, service providers and regulators offering attractive rates. But they must distinguish between the retail and wholesale markets and develop separate pricing strategies for each.
These are the conclusions of Ovum?s lastest report, 'Pricing Broadband: A Model for Competitive Advantage'. It claims service providers must address these issues head-on, and quickly, rather than leaving them in the 'too hard to tackle' tray.
David Rogerson, co-author of the report, said: ?The key to future pricing is to give priority to the wholesale price. Today, wholesale is little more than an afterthought, bolted on to existing service prices. However the successful development of the broadband market requires that wholesale is the primary price benchmark. Wholesale prices should be established on a cost-plus basis, giving adequate return on capital to network investors, but regulated to ensure that no abuse of market power occurs.?
Ovum argues the wholesale approach offers the most balanced pricing and leads to increased profit potential to incumbents, new entrants and service providers. Wholesale-led pricing also needs relatively little regulatory intervention.
?There is a dichotomy which all telcos are facing, namely the need to service the growing wholesale market without undermining the existing, larger and more profitable retail market,? added Rogerson.
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