INTELFRA Ltd.: Pricing Telecom Infrastructure in a Monopolistic Market
Indian Telecom Infrastructure Ltd. (INTELFRA) is about to develop the proprietary basic infrastructure and deliver that infrastructure on demand to the customers in Lake East, India. Using the Telecom Infrastructure (TI) services provided by INTELFRA, customers will no long need to incur the high fixed costs of building the required infrastructure on their own, nor commit to long-term fixed-price outsourcing contracts. Though the business is promising, TI services required significant ex ante development and start-up costs, and the demand was uncertain as Lake East is an upcoming township comprising both residential and commercial spaces. Pricing became a difficult, yet crucial, business decision for INTELFRA. High prices could drive customers away, but low prices would not be profitable, possibly even unable to cover the high investment costs. This case addresses the critical pricing issues facing telecom infrastructure services providers (TISPs).