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International Telecom Settlements: Gaming Incentives, Carrier Alliances, and Pareto-Suerior Reform

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Liberalized countries that allow competition in international telecommunications favor traffic re-routing practices as arbitrage against foreign monopolists. This view is seriously incomplete. Monopolists, allied with carriers in liberalized countries, can use these practices to reduce termination payments to nonalliance carriers-thereby harming also consumers in liberalized countries -by gaming regulations that require equal termination rates at both ends and 'proportional return' (the monopolist's traffic is allocated among carriers in proportion to their shares of traffic to its country). We also present a simple bilateral settlements reform that eliminates gaming incentives and other proportional-return distortions, yet benefits both countries.

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  • David A. Malueg & Marius Schwartz, 2001. "International Telecom Settlements: Gaming Incentives, Carrier Alliances, and Pareto-Suerior Reform," Working Papers gueconwpa~01-01-04, Georgetown University, Department of Economics.
    • Handle: RePEc:geo:guwopa:gueconwpa~01-01-04
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    Keywords

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    JEL classification:

    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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