nce Closely related to this is the accounting rate system, where interna- tional operators agree how the revenue from an international call is shared between them. This area is often linked to regulatory and political considerations. Figure 11.6 Typical price variation during a product's life cycle 11.4.3 Regulatory influences 3. Responsiveness to change. All pricing policies must be flexible so that they can be adjusted rapidly to changing environments, In markets which have recently been liberalised, new entrants such as regulatory pressures, introduction of new technology, usually target the profitable areas first (Gandhi, 1992). Their main entry or exit of strong competitors. weapon for gaining market share is to cut prices, so forcing the 4. Market segments and services. The price set will clearly depend existing supplier to also cut his price and to reduce his costs in order on the service being provided, its costs and consumer demand, to stay competitive. Generally the existing supplier cannot cut and the market segment into which the service is being sup- operating costs quickly, since he has an established network to plied. It is common for the same service to be priced differently support and older work practices. depending on the market segment, e.g. private and corporate The existing supplier is also usually burdened by regulatory con- users. Local calls are also usually priced at below costs, siderations which force him to continue to provide services, even 11/12 The telecommunications industry though they may be uneconomical. This is the case of the social are becoming obsolete in developed countries. The prime reasons cross-subsidy, where the profitable areas of a business have to for this are: subsidise the non-profitable ones, a concept which is difficult to maintain in a fiercely competitive market. 1. The lower capital costs involved; the initial investment in the It is worth noting that if a PTO has to agree its tariffs with another product having being recouped and its price therefore being l