The costing and cost based pricing approach in telecommunication sector: Model proposal for Turk Telecommunication Co

IV ABSTRACT THE COSTING AND COST BASED PRICING APPROACH IN TELECOMMUNICATION SECTOR: MODEL PROPOSAL FOR TURK TELECOMMUNICATION CO Vedat EKERGİL Administrative Major Branch - Accounting Graduate School of Social Sciences, Anadolu University, April 2005 Advisor: Ass. Prof. Kerim BANAR Telecommunication sector is a strategic sector that provides the individual communication, forming the fundamental infrastructure of information society, contributes developing of other sectors, and creates economic value by itself. Turk Telecommunication Co is carrying out an important part of the sector. But the monopolist formation in the sector forms out many deviance. By regulating the access and interconnection service costs according to cost basis, it is aimed to prevent anti competition activities like, cross-subsidized, predatory pricing and price competition within this study, approaches for determining telecom service costs and cost based pricing cost based pricing are observed. "Historical costs" and "forward-looking costs" are the two taxonomies found in telecom cost pricing. "Fully allocated cost" in historical cost approach, "total service long-run incremental cost" in forward-looking cost approach in Europe and in USA "total element long-run incremental cost" is used for telecom cost pricing approaches widely. Telecom companies use some pricing approaches when determining the tariffs. Cost based pricing in telecom sector is examined under three topics. On of these is used widely in monopolist economic and named "pricing based marginal cost". Secondly, by adding a portion of predetermined profit margin onto the service of costs is named as cost plus profit approach. Thirdly and the last approach is used in high competitive environment of which the service cost is obtained by adding alternative cost to the profit that is named as "efficient component pricing rule".After examining the cost and pricing of telecom services, ADSL, which is one of the services of telecom is examined under full costing approach. When examining, by the data of Turk Telecommunication Co, a model is offered for costing and pricing. Key words: Cost Accounting, Telecommunications, Cost Based Pricing, Fully Allocated Cost, Stand-Alone Cost (SAC), Long-run Incremental Cost (LRIC), Efficient Component Pricing Rule, Two Part Tariff, Ramsey Pricing, Rate of Return Regulation.