Market structure, competition, and pricing in United States international telephone service markets

Several national governments argue international telephone prices are high because of asymmetric competition and inefficiencies in the accounting arra ngements that govern the telecommunications services trade. This paper deve lops a model of U.S. international telephone pricing that allows for the ac counting rate system and contains market-structure variables for both the U .S. and foreign ends of bilateral markets. Model estimation is on 39 bilate ral telephone markets from 1991 through 1994. Parameter estimates reveal th at settlement rates, market concentration, competition at either end of the bilateral market, and ownership are significant determinants of prices. Th ese findings support initiatives promoting accounting-rate reductions and i ncreased competition.