Tariff
A tariff is a tax on imports or exports between sovereign states. It is a form of regulation of foreign trade. It is a policy that taxes foreign products to encourage or protect domestic industry. It helps limit trade deficits. The tariff is historically used to protect infant industries and to allow import substitution industrialization.
Telecommunications tariff
At a minimum, tariffs imposed must cover the cost of providing the service to the consumer. The consumer may be the final user or an intermediary such as a service provider. If a telecommunications operator cannot recover its costs, it will make a loss and the company will go bankrupt. Tariffs must also be used to cover maintenance, additional research and other indirect costs associated with providing the service. However, telecommunications service providers must be careful not to over-price each service, as prices have a direct influence on demand for that service (see supply and demand). Such an operator must constantly balance the need to provide cheaper rates, especially if there is strong competition, with the cost of maintaining the service at an optimum quality that is acceptable to the customer. If an operator charges too much, it risks alienating its customers, resulting in a loss of traffic and therefore revenue; if they charge too little, they will have insufficient capital to maintain the network's quality of Service. Over time this will result in customer attrition.