China IP Network Cost Proxy Model and Its Applications

5th Communication Policy Research South Conference (CPRsouth5), Xi'an, China

Posted: 15 Dec 2010

See all articles by Zhanhong Xin

Zhanhong Xin

affiliation not provided to SSRN

Date Written: December 6, 2010

Abstract

LECOM and HCPM are not used to the China with big differences between city and country, eastern and western part. The paper describes the modeling process of IP Network Cost Proxy Model (INCPM) in detail. The procedure of the estimation of telecom business cost is divided into two processes: the simulation of network construction cost in which technical factor being introduced to substitute the effect of network elements that makes the cost functions only consist of scenario variables and become a simple, open and transparent tool; the estimation of telecom service annual cost which consists of network elements depreciation, cost of operation and maintenance, and expenditure of marketing and sales avoiding to get data from accounting of enterprises.

The results of simulations and estimations to the two dominant IP services in China, voice and broadband access, demonstrate that natural monopoly still in these IP services; and also demonstrate that there are cross-subsidies from the voice to the broadband access and from developed areas to undeveloped areas. The paper gives a revised Ramsey pricing formula which proves the cross-subsidy be reasonable. In order to promote the universal broadband access to fill in the digital divide in China, the cross- subsidy is necessary; the floor price protection of voice service may be need; therefore, the new entrants should take obligation of the universal broadband access.

Keywords: IP network, cost proxy model, simulation, Ramsey pricing, cross-subsidy, telecom policy

Suggested Citation

Xin, Zhanhong, China IP Network Cost Proxy Model and Its Applications (December 6, 2010). 5th Communication Policy Research South Conference (CPRsouth5), Xi'an, China . Available at SSRN: https://ssrn.com/abstract=1724572

Zhanhong Xin (Contact Author)

affiliation not provided to SSRN ( email )

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