Abstract

The aim of the article is to analyse those market conditions which justify the adoption of "ex ante" regulation for retail telephone service prices, as well as those market conditions which would, on the other hand, suggest the lifting of such regulation. "Price cap" was designed in order to simulate competition and hence rebalancing tariffs, protecting disabled and low income customers, where the actual conditions were those of monopoly. Once liberalization is effective and competition determines both a reduction in tariffs and freedom of choice, the risk and opportunities of a "price cap" regulation must be questioned, above all if one considers the existence of an efficient "network cap" regulation. The "paradox" of "price cap" ("ex ante" regulation of both wholesale and retail), should be avoided by lifting the retail "price cap" while keeping the "network cap"; retail "safeguard cap" can be introduced in order to avoid a price increase in telephone services characterized by a low level of competition (retail access, rural areas, etc). The consumer benefit will be assured by more competition in terms of choice and retail price due to lower wholesale prices. Specific "price tests" can be introduced in order to avoid predatory pricing related to services characterized by a high level of competition.