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Tariffing This article is one of a group being considered for deletion in accordance with Wikipedia's deletion policy. Please see the policy discussion page of the votes for deletion list for details. This request is being discussed to form a consensus whether this is, or could be, an article appropriate for Wikipedia. If you feel deletion is not justified by Wikipedia deletion policy you may vote against its deletion. Please do not remove this notice or blank this article while the question is being considered. However, you are welcome to continue editing this article, especially if you can address the concerns of those who believe the article should be deleted. Should you do so, please remark on the policy discussion page regarding its improvement. Tariffs are the prices charged to consumers by telecommunications service providers. Tariff systems vary from country to country and company to company, but in general they are based on several simple principles 1. Why are Tariffs charged? Tariffs must, as a minimum, cover the cost of providing the service to the consumer, whether the consumer is the actual end user or an intermediary or other service provider. If a telecommunications service provider cannot recover its costs, then it will make a loss and the company will go bankrupt 1. Tariffs should also be used to cover maintenance, additional research and other indirect costs associated with providing a service 1. However, telecommunications service providers must be careful when determining their tariff policies as prices have a direct influence on demand for that service (see Supply and demand 2. An operator must constantly balance the need to provide cheaper rates, especially if there is strong competition, with the cost of maintaining the service at an optimum quality that is acceptable to the consumer 3. If the operator charges too much, he risks alienating his consumers resulting in a loss of traffic and therefore revenue, and if he charges too little, he will have insufficient capital to maintain the network’s QoS, which over time will result in similar customer disillusionment, albeit for a different reason. Components of Tariffs Tariffs are generally made up of two components 1: - Standing Charges – These are fixed charges that are used to pay for the cost of the connection to the nearest exchange and the equipment to monitor that user’s phone line or service connection. They are usually paid on a monthly basis.
- Call Charges – These charges are usually variable and are used to pay for the cost of the equipment to route a call from the caller’s exchange to the recipient’s exchange. The charges can also be calculated on a fixed per call basis, variable basis depending on the time or distance of the call, or a combination of the two. Call charges can even vary at different times of the day.
It should be noted that these components form a basic tariff system and there are much more complex versions in existence too. For example, there is generally a connection fee to connect a new user to the network. Also, in some countries, the Call Charges are fixed at a monthly rate and included in the Standing Charges. Emergency, information and other types of calls can be automatically charged to the recipient and there is always the option of call collect 1. Tariffs are also charged at different rates depending on the type and QoS of the service provided. Dial-up modem connections are charged at normal telephone costs, but connections such as DSL are usually charged using a completely different system 1 due to their “always on” nature. Impact of Tariffs on traffic It can be assumed that the more an operator charges, the less likely a consumer will be to use his service, and the less he charges the more likely the user will be to use his service more. What is of significant importance is that an operator can use this fact to reduce traffic intensity on the network at peak times thereby resulting in cheaper equipment costs and a higher overall revenue and profit3. It has been noted in studies of Internet traffic that the traffic intensity is directly affected by the Tariffs charged in connecting user to their Internet Service Provider (ISP). For example, Telkom, a circuit-switched network provider, charges different Tariffs at different times of the day. The effect of this change in price was detected by examining the ISP’s modem logs and noting which users connected to the ISP via dial-up modems. It was noted that at the time that Telkom rates decreased, the traffic intensity logged by the ISP increased dramatically and then decayed over time at an exponential rate. The conclusion of the research was that by varying prices over time, a telecommunications service provider can reduce the level of the traffic intensity at peak periods, resulting in lower equipment costs because of the reduced need to provision to meet peak demand, which in turn leads to long-term revenue and profitability increases 3. References 1 Farr R.E., Telecommunications Traffic, Tariffs and Costs – An Introduction For Managers, Peter Peregrinus Ltd, 1988. 2 D.E. Vannucci, I.G. Kennedy, M. Barker, Impact of Tariff on dial-up internet traffic: Modelling the subscriber response as a dynamic system, ITC18 Workshop for Developing Countries, Berlin, 2003. 3 Kennedy I., Why is Network Planning Important?, Lecture Notes, ELEN5007 – Teletraffic Engineering, School of Electrical and Information Engineering, University of the Witwatersrand, 2005
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