Network decompensation and regional imbalances in rate reform processes: A case study in South America

Abstract

Rebalancing telephone rates in regulated competitive environments is a multi-layered process with impact on development variables. An efficient tariff policy implies strategic equilibria in the network evolution, while maintaining overall quality and competitiveness. This study on the reforms implemented in Argentina in 1997 sheds light on the less-known phenomena of network decompensation, regional differences in the value of local services, and access imbalances. A customer survey is used to provide straightforward information on the impact of the reforms just after their implementation, and the proposed division of large metropolitan areas is examined along with an introductory analysis of decompensation and inverse cross-subsidization (rural-urban).