Competition and price dispersion in international long-distance calling

This paper examines the relationship between changes in telecommunications provider competition on international long-distance routes and changes in prices. Overall, increased competition is associated with significantly lower prices to consumers of long-distance services. However, the relationship between competition and price varies according to the type of long-distance plan considered. For the plans frequently selected by price-conscious consumers, increased competition on a route is associated with lower prices. In contrast, for the basic international plans that are the default selection for consumers, increased competition on a route is actually associated with higher prices. Thus price dispersion appears to increase as competition increases.