The escalating need for more bandwidth makes access to broadband networks one of the most significant competitive and regulatory issues that will have to be addressed in the upcoming years. Competition will be intense as alternative broadband technologies, such as cable, satellite, and fixed wireless access become increasingly available. In addition, regulators in some countries require incumbent carriers to make their networks available to competitors for broadband access and actively pursue a national policy for broadband competition. Broadband providers must strategically distinguish themselves through the rollout of new services, competitive pricing schemes and the introduction of different Quality of Service (QoS) levels. Many wireline providers have taken the first steps in facing the upcoming competition by making broadband access available to competitors via Local Loop Unbundling (LLU) and by adopting Asynchronous Transfer Mode (ATM) and Asymmetric Digital Subscriber Loops (ADSL) technology for their broadband integrated-services digital networks.

This paper presents a discussion on selected competitive pricing methodologies and QoS levels for wholesale broadband services with a particular focus on ATM integrated-services networks. While Mr. Dippon concludes that no one particular pricing methodology fits all situations, wholesale providers should select a dynamic usage-based methodology, such as spot pricing, capacity-based pricing, time-of-day pricing, or a combination of usage-based and flat-rate methods in order to achieve network and economic efficiency. Further, economic efficiency is best achieved with a pricing methodology that allows customers to determine which QoS level is required for their specific needs. We do not recommend the use of pure cost-based methodologies, such as long run incremental cost, short run incremental cost, marginal cost, and fully allocated costs, as these methods tend to ignore or distort the recovery of joint and common costs.

This paper was presented at The Rutgers University 14th Annual Western Conference in San Diego, California, June 27–29, 2001.