On The Impact Of "Call-Back" Competition On International Telephony

In this paper we build a simple three-country model to evaluate the impact of "call-back" on international telephony. The effects on both accounting rates and collection prices are studied. Call-back firms exploit arbitrage opportunities in collection prices among countries, rerouteing calls that originate in countries with high prices for international phone calls via countries with low prices. Contrary to what it is commonly perceived, we show that call-back tends to magnify the distortions associated with the current accounting rate regime. In particular call-back puts upward pressure both on low price countries foreign accounting rates and collection charges. Call-back companies are assumed to enjoy a price discount on each rerouted call; we show that the larger the price discount offered to call-back companies, the higher the prices for international calls in the country hosting call-back.