Question

When a subscriber of one telecom operator calls another subscriber of different telecom operator, the destination telecom company (of the receiving subscriber) charges a small connection fee to the originating telecom operator. In Country Y, this connection fee, which is charged on a per minute basis, is stipulated by the regulator and thus, is same for every telecom operator.

Recently, in country Y, several new telecom operators have entered the market and almost all of them are enticing customers by charging much lower call rates than are charged by the existing operators. Since connection fee is one of the sources of revenue for new companies, the regulator should increase the connection fee so that the financials of the new telecom operators improve and thereby, they are able to better compete in the market.

Select a statement below which provides the strongest reason to suggest that the recommendation of the author would have the opposite effect than as envisaged.
(A) The connection fee is such a small component of revenues of any telecom companies that no company could survive by just relying on this.
(B) In the past, whenever regulator has been advised a course of action by an outside agency, the regulator has taken a completely opposite action step.
(C) The financial health of a telecom company is determined by the total profits generated by the company, irrespective of the source of revenues.
(D) Due to highly competitive call rates, the number of outgoing calls from an average user of a new telecom company is expected to be much greater than the number of incoming calls.
(E) Increase in the connection fee may be passed on by the companies to the end users, which may make consumers switch their existing telecom company.

Answer 1

(E) Increase in the connection fee may be passed on by the companies to the end users, which may make consumers switch their existing telecom company.

Step-by-step explanation:

By increasing the connection fee of new telecom operators, the regulator will help them improve their financial situation and make them more profitable. But this will impact end-users negatively since they will have to pay higher connection fees. As is known, users always opt for the company which charges them lower fees.