Research Article
Telecommunications Operators' Sharing System for Universal Service Costs Using a Linear Agency Model
Published: January 1999 · Vol. 28 No. 4 · pp. 1049-1071
Full Text
Abstract
Using a linear agency model, this study seeks to derive additional conclusions that could not be obtained in Seo Yun-seok and Lee Yong-gyu (1997) by partially resolving issues that could not be addressed in general agency models. Specifically, the study simultaneously incorporates into the model the effort toward universal service provision and the related cost-reduction effort—both of which exert opposing effects on the access provider's incurred costs—and explicitly includes within the model the extent to which these efforts affect incurred costs and their impact on the access user's business operations. Unlike general models, by imposing special assumptions on the two types of effort by the access provider, the model simultaneously considers both efforts. The analysis shows that even under these circumstances, Pareto improvement can be achieved when the regulator actively intervenes to design a universal service cost-sharing scheme. The primary reason the regulator-intervened system could achieve such Pareto improvement is that the designed cost-sharing amounts contain incentive elements that induce each operator to behave efficiently. That is, the access user is required to pay its share based on revenue that contains information about its effort, and the access provider is likewise compensated through universal service provision payments designed based on its incurred costs and the access user's revenue, both of which contain information about the provider's effort. In the case of Korea, there is as yet no agreed-upon definition of universal service in telecommunications, nor have its costs been measured; however, as seen in the examples of advanced countries, attempts to define universal service, measure its costs, and share them among telecommunications operators are expected to be made in the near future. The universal service cost-sharing method proposed in this study could serve as an alternative.
