Path: utzoo!telecom-request Date: 08 Jun 91 18:14:41 From: Charlie Mingo Newsgroups: comp.dcom.telecom Subject: Re: Hollings and Pac*Bell Message-ID: Organization: TELECOM Digest Sender: Telecom@eecs.nwu.edu Approved: Telecom@eecs.nwu.edu X-Submissions-To: telecom@eecs.nwu.edu X-Administrivia-To: telecom-request@eecs.nwu.edu X-Telecom-Digest: Volume 11, Issue 438, Message 3 of 9 Lines: 43 In a recent posting, John Higdon attacks Pac*Bell's new voicemail service, because it is priced "well below" that of Pac*Bell's competitors, and because it offers features which the local telephone company is uniquely capable of providing. He claims that this is part of a strategy of "predatory pric[ing] designed to murder the competition," and argues that Pac*Bell's voicemail service offers "a glimpse of the future under the Hollings bill" (which would permit RBOC's to manufacture telephone equipment) and goes on to call for the bill to be defeated in the House. Although I take no position on the Hollings bill itself, it sounds perverse to me to attack a company for offering quality service at a low price. It must be remembered that antitrust law generally (and the Bell divestiture in particular) was designed to benefit *consumers* not competitors. "Predatory pricing," for example, is defined as selling a product *below the cost of production* for the purpose of eventually monopolizing a market. Mr. Higdon provides no evidence that Pac*Bell has priced its voicemail service below the cost of providing it; on the contrary, he himself shows that Pac*Bell's size and credit rating give it easier access to capital, which lowers its cost of providing the service. This is a natural advantage which large, established companies have over smaller ones; pricing one's goods to reflect one's lower cost structure is neither anticompetative nor "unfair." Mr. Higdon also writes that "[w]hen the field has been thinned out sufficiently, then the price can be whatever [Pac*Bell] wants." It should be clear that Pac*Bell cannot raise the price of voicemail in the future above what independent providers currently charge, without allowing the competition to reestablish itself. Given this limitation, any such "predatory pricing" strategy would be decidedly unprofitable. Likewise, his argument that Pac*Bell should be prevented from offering voicemail, because it alone is in a technical position to provide special services (such as "stutter" dialtone and free call forwarding), is similarly flawed. Consumers would not be better off by making these desirable features unavailable merely to protect inefficient competition. (Of course, if it is possible to extend these feature to competitors' services, Pac*Bell should be required to.) The key concept here should be service to consumers, and not "fairness" to competitors.