The liberalization process of telecommunications and the role of the national regulatory authorities in pricing policies: A case study from Greece

The European Union (EU) decided to fully liberalize the telecom markets of all member states by January 1998 with some exceptions where extra time was given. The scope of this paper is to show primarily the liberalization process that took place in the telecommunication markets in the EU, emphasizing the pricing policies for regulation, and then to investigate the role of National Regulatory Authorities (NRAs) along with two case studies from the Greek telecoms market. The research has evidenced that the basis of the liberalization process is the cost orientation principle. For this reason an appropriate costing system for regulatory reasons must be developed by the incumbent operator which will incorporate specific essential principles before its approval by the NRA. For fixed voice telephony cost orientation, two different methodologies are examined and explained in detail: the Fully Distributed Cost (FDC) and the Long-Run Average Incremental Cost (LIRAIC). NRAs have to play an increasingly important role for the sector and pricing policies.