Tariffs are the prices charged to consumers by telecommunications service providers. Tariff systems vary from country to country and company to company, but in general they are based on several simple principles [1].

Why are tariffs charged?

Tariffs must, as a minimum, cover the cost of providing the service to the consumer, whether the consumer is the final customer or an intermediary such as a service provider. If a telecommunications service provider cannot recover its costs, then it will make a loss and the company will go bankrupt [1]. Tariffs should also be used to cover maintenance, additional research and other indirect costs associated with providing a service [1]. However, telecommunications service providers must be careful in determining their tariff policies as prices have a direct influence on demand for that service (see Supply and demand) [2]. Such an operator must constantly balance the need to provide cheaper rates, especially if there is strong competition, with the cost of maintaining the service at an optimum quality that is acceptable to the customer [3]. If operators charge too much, they risk alienating their customers, resulting in a loss of traffic and therefore revenue; if they charge too little, they will have insufficient capital to maintain the network’s QoS, which over time will result in similar customer disillusionment, albeit for a different reason. Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their creditors. ... Maintenance see repair and maintenance Maintenance is a legal term of art that is used to describe child support and alimony (also called spousal support). ... Research is an active, diligent and systematic process of inquiry in order to discover, interpret or revise facts, events, behaviours, or theories, or to make practical applications with the help of such facts, laws or theories. ... The supply and demand model describes how prices vary as a result of a balance between product availability at each price (supply) and the desires of those with purchasing power at each price (demand). ... Competition characterises a biochemical, ecologic, economic, political, or sporting activity whereby two or more individuals or groups strive antagonistically against one another for some reward. ... The abbreviation QOS could refer to one of several things: Quality of service, a measure of the reliability of a computer network Queen of the South F.C., a Scottish football club Quarterdeck Office Systems, a software company that is now part of Symantec This is a disambiguation page — a...

Components of tariffs

Tariffs are generally made up of two components [1]:

• Standing Charges – These are fixed charges that are used to pay for the cost of the connection to the nearest exchange and the equipment to monitor that customer’s phone line or service connection. They are usually paid on a monthly basis, and called rental.
• Call Charges – These charges are usually variable and are used to pay for the cost of the equipment to route a call from the caller’s exchange to the recipient’s exchange. The charges can also be calculated on a fixed per call basis, variable basis depending on the time or distance of the call, or a combination of the two. Call charges can even vary at different times of the day.

It should be noted that these components form a basic tariff system and there are much more complex versions in existence too. For example, there is generally a connection fee to connect a new user to the network. Also, in some countries, the call charges are fixed at a monthly rate and included in the standing charges. Emergency, information and other types of calls can be automatically charged to the recipient insread of the caller, and there is always the option of call collect [1]. A wide variety of systems of interconnected components are called networks. ...

Tariffs also depend on the bandwidth provided. For example, dial-up modem connections are charged at normal telephone costs, but connections such as DSL are usually charged using a completely different accounting system [1] due to their “always on” nature. A modem (a portmanteau word constructed from modulator and demodulator) is a device that modulates an analog carrier signal (sound), to encode digital information, and that also demodulates such a carrier signal to decode the transmitted information. ... A telephone handset A touch-tone telephone dial Telephone This article is about telephone technology. ... DSL is a TLA that can stand for: Digital Subscriber Line Damn Small Linux Domain-specific language This is a disambiguation page — a navigational aid which lists other pages that might otherwise share the same title. ...

Impact of tariffs on traffic

It is true that the more an operator charges, the less customers will use the service, particularily in the cost-sensitive or elastic residential market. The less the operator charges, the more customers will use their services [3].

It has been noted in studies of Internet traffic that the traffic intensity is directly affected by the tariffs charged in connecting customers to their Internet Service Provider (ISP). For example, a circuit-switched network provider, charges different tariffs at different times of the day. It was noted that at the time that the rates decreased, the traffic intensity logged by the ISP increased dramatically and then decayed over time at an exponential rate. The conclusion of the research was that by varying prices over time, a telecommunications service provider can reduce the level of the traffic intensity at peak periods, resulting in lower equipment costs because of the reduced need to provision to meet peak demand, which in turn leads to increases in long-term revenue and profitability [2]. An Internet service provider (ISP) is a business or organization that offers users access to the Internet and related services. ...

References

[1] Farr, R.E., Telecommunications Traffic, Tariffs and Costs – An Introduction For Managers, Peter Peregrinus Ltd, 1988.

[2] Vannucci, D.E., Kennedy, I.G., Barker, M., Impact of Tariff on dial-up internet traffic: Modelling the subscriber response as a dynamic system, ITC18 Workshop for Developing Countries, Berlin, 2003.

[3] Kennedy I.G., Why is Network Planning Important?, Lecture Notes, ELEN5007 – Teletraffic Engineering, School of Electrical and Information Engineering, University of the Witwatersrand, 2005