Optus and the Australian Telecommunications Industry Discussion and Recommendations on Applied Pricing Theory

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OPTUS AND THE AUSTRALIAN TELECOMMUNICATIONS INDUSTRY

Discussion and Recommendations on Applied Pricing Theory

TABLE OF CONTENTS 1

EXECUTIVE SUMMARY 2

INTRODUCTION 3

REPORT 3

Hotelling Law 3

Asymmetric Information 3

Demand Elasticity 4

Perfect Price Discrimination 5

Quantity discrimination 5

Multimarket price discrimination 5

Two-Part Tariffs 6

Tie-In Sales 6

CONCLUSION 6

The Future 6

Data Backup 7

After Sales Service 7

Asymmetry vs Reputation 8

The Vision 8

REFERENCES 9

APPENDIX 10

EXECUTIVE SUMMARY

Optus is an experienced telecommunications industry player with 17 years of experience in the field. The “challenger” spirit of this organisation is clearly displayed in the vast variety of tactics used by them to compete in the market.

The amount of knowledge most people have about telecommunications is below average nevertheless it is a popular and developing industry aimed at servicing every age group, demographic and budget. While this fact opens doors for substantial opportunities, the approach to pricing is crucial not only for competitive purposes but also to make sure every segment of the market is considered in the plans. The amount and the rate of change of information in this industry create some ethical issues described in brief.

The demand for the products and services of the telecommunications industry is increasing. This means that successful companies like Optus take an economical “back to basics” methodology in what is discovered as being an almost “by-the-book” operations to capitalise on the maximum share of the market. These aspects are discussed with regards to economic theory and supported by...