Alternative Approaches to the Treatment of Access Charges in Price Index Construction

We propose new approaches to the treatment of fixed access charges in price indexes. These charges are payments for accessing goods and services, but are not dependent on the amounts ultimately purchased. This relatively neglected topic is increasingly important given the growth in telecommunications, data and entertainment services that use an access charge model. Basing our models in alternative consumer behaviour frameworks and using UK telecommunications data, we show that the choice of treatment can be very empirically consequential for price indexes. As result, it is also consequential for the measurement of national output, consumption and productivity.