 density in the country and its per capita GNP (ITU, Large users subsidise the smaller ones. However, the large users are 1988b; Varakin, 1989). the ones most sensitive to small price differentials, and they are also Figure 11.7 shows a typical curve for the usage of a technology sophisticated enough to shop around for the best prices. Therefore, during its life cycle, and it should be compared to the price curve of in a competitive environment, the telecommunication operators Figure 11.6. Following its introduction usage increases until it give them the best terms and now it is usually the smaller users who reaches saturation and then begins to decline as it is gradually subsidise the larger ones. The small user funds the operator's tele- replaced by a newer technology. communications infrastructure, whilst the larger user provides the However the rate of technology usage varies, there being consid- marginal revenue on this, so giving the carrier the flexibility needed erable variation between developed and developing countries. The to price for its preferential customers. telephone will be the most common form of communications well Competition can arise from many sources. The PTO's customers into the next century, especially in developing countries. New may themselves be competitors, for example reselling spare capac- services, such as ISDN, need more expensive terminals and high ity to other users. The problem can get worst when international user densities to justify their introduction, which is unlikely to occur resale is concerned. This presents a dilemma to the primary sup- in developing countries for some time. The usual route is for plier: if the prices are too low then it in effect invites resellers to take households to have telephones first and for these then to be up- away its most lucrative business. If too high no one will use the graded to cater for more sophisticated services. Older technologies service in the first place (Wood and Turton, 1992). The solution is are often introduced into develop