A Retail benchmarking approach to eficient two-way access pricing

We study a retail benchmarking approach to determine access prices for interconnected networks. Instead of considering fixed access charges as in the existing literature, we study access pricing rules that determine the access price that network i pays to network j as a linear function of the marginal costs and the retail prices set by both networks. In the case of competition in linear prices, we show that there is a unique linear rule that implements the Ramsey outcome as the unique equilibrium, independently of the underlying demand conditions. In the case of competition in two-part tariffs, we consider a class of access pricing rules, similar to the optimal one under linear prices but based on average retail prices. We show that firms choose the variable price equal to the marginal cost under this class of rules. Therefore, the regulator (or the competition authority) can choose one among the rules to pursue additional objectives such as consumer surplus, network covera.

A Simple Access Pricing Rule to Achieve the Ramsey Outcome in Two-Way Access

In this paper, I consider a general and informationally effcient approach to determine the optimal access rule and show that there exists a simple rule that achieves the Ramsey outcome as the unique equilibrium when networks compete in linear prices without network-based price discrimination. My approach is informationally effcient in the sense that the regulator is required to know only the marginal cost structure, i.e. the marginal cost of making and terminating a call. The approach is general in that access prices can depend not only on the marginal costs but also on the retail prices, which can be observed by consumers and therefore by the regulator as well. In particular, I consider the set of linear access pricing rules which includes any fixed access price, the Efficient Component Pricing Rule (ECPR) and the Modified ECPR as special cases. I show that in this set, there is a unique access rule that achieves the Ramsey outcome as the unique equilibrium as long as there exists at least a mild degree of substitutability among networks' services.

A simple access pricing rule to achieve the Ramsey outcome for interconnected networks

This paper considers a general and informationally efficient approach to determine the optimal access pricing rule for interconnected networks. It shows that there exists a simple rule that achieves the Ramsey outcome as the unique equilibrium when networks compete in linear prices without network-based price discrimination. The approach is informationally efficient in the sense that the regulator is required to know only the marginal cost structure, i.e. the marginal cost of making and terminating a call. The approach is general in that access prices can depend not only on the marginal costs but also on the retail prices, which can be observed by consumers and therefore by the regulator as well. In particular, I consider the set of linear access pricing rules which includes any fixed access price, the Efficient Component Pricing Rule (ECPR) and the Modified ECPR as special cases. I show that in this set, there is a unique rule that implements the Ramsey outcome as the unique equilibrium independently of the underlying demand conditions.

A retail benchmarking approach to efficient two-way access pricing

We study a retail benchmarking approach to determine access prices for interconnected networks. Instead of considering fixed access charges as in the existing literature, we study access pricing rules that determine the access price that network i pays to network j as a linear function of the marginal costs and the retail prices set by both networks. In the case of competition in linear prices, we show that there is a unique linear rule that implements the Ramsey outcome as the unique equilibrium, independently of the underlying demand conditions. In the case of competition in two-part tariffs, we consider a class of access pricing rules, similar to the optimal one under linear prices but based on average retail prices. We show that firms choose the variable price equal to the marginal cost under this class of rules. Therefore, the regulator (or the competition authority) can choose one among the rules to pursue additional objectives such as consumer surplus, network coverage or investment: for instance, we show that both static and dynamic e±ciency can be achieved at the same time.

An analysis on the network access pricing rules

Mémoire numérisé par la Division de la gestion de documents et des archives de l'Université de Montréal

The new economy: Essays in network economics and two-sided markets

Following the Introduction, which surveys existing literature on the technology advances and regulation in telecommunications and on two-sided markets, we address specific issues on the industries of the New Economy, featured by the existence of network effects. We seek to explore how each one of these industries work, identify potential market failures and find new solutions at the economic regulation level promoting social welfare. In Chapter 1 we analyze a regulatory issue on access prices and investments in the telecommunications market. The existing literature on access prices and investment has pointed out that networks underinvest under a regime of mandatory access provision with a fixed access price per end-user. We propose a new access pricing rule, the indexation approach, i.e., the access price, per end-user, that network i pays to network j is function of the investment levels set by both networks. We show that the indexation can enhance economic efficiency beyond what is achieved with a fixed access price. In particular, access price indexation can simultaneously induce lower retail prices and higher investment and social welfare as compared to a fixed access pricing or a regulatory holidays regime. Furthermore, we provide sufficient conditions under which the indexation can implement the socially optimal investment or the Ramsey solution, which would be impossible to obtain under fixed access pricing. Our results contradict the notion that investment efficiency must be sacrificed for gains in pricing efficiency. In Chapter 2 we investigate the effect of regulations that limit advertising airtime on advertising quality and on social welfare. We show, first, that advertising time regulation may reduce the average quality of advertising broadcast on TV networks. Second, an advertising cap may reduce media platforms and firms' profits, while the net effect on viewers (subscribers) welfare is ambiguous because the ad quality reduction resulting from a regulatory cap o¤sets the subscribers direct gain from watching fewer ads. We find that if subscribers are sufficiently sensitive to ad quality, i.e., the ad quality reduction outweighs the direct effect of the cap, a cap may reduce social welfare. The welfare results suggest that a regulatory authority that is trying to increase welfare via regulation of the volume of advertising on TV might necessitate to also regulate advertising quality or, if regulating quality proves impractical, take the effect of advertising quality into consideration. 3 In Chapter 3 we investigate the rules that govern Electronic Payment Networks (EPNs). In EPNs the No-Surcharge Rule (NSR) requires that merchants charge at most the same amount for a payment card transaction as for cash. In this chapter, we analyze a three- party model (consumers, merchants, and a proprietary EPN) with endogenous transaction volumes and heterogenous merchants' transactional benefits of accepting cards to assess the welfare impacts of the NSR. We show that, if merchants are local monopolists and the network externalities from merchants to cardholders are sufficiently strong, with the exception of the EPN, all agents will be worse o¤ with the NSR, and therefore the NSR is socially undesirable. The positive role of the NSR in terms of improvement of retail price efficiency for cardholders is also highlighted.

Mobile termination and mobile penetration

In this paper, we study how access pricing affects network competition when subscription demand is elastic and each network uses non-linear prices and can apply termination-based price discrimination. In the case of a fixed per minute termination charge, we find that a reduction of the termination charge below cost has two opposing effects: it softens competition but helps to internalize network externalities. The former reduces mobile penetration while the latter boosts it. We find that firms always prefer termination charge below cost for either motive while the regulator prefers termination below cost only when this boosts penetration. Next, we consider the retail benchmarking approach (Jeon and Hurkens, 2008) that determines termination charges as a function of retail prices and show that this approach allows the regulator to increase penetration without distorting call volumes.

Mobile termination and mobile penetration

In this paper, we study how access pricing affects network competition when subscription demand is elastic and each network uses non-linear prices and can applytermination-based price discrimination. In the case of a fixed per minute terminationcharge, we find that a reduction of the termination charge below cost has two opposing effects: it softens competition but helps to internalize network externalities. Theformer reduces mobile penetration while the latter boosts it. We find that firms always prefer termination charge below cost for either motive while the regulator preferstermination below cost only when this boosts penetration.Next, we consider the retail benchmarking approach (Jeon and Hurkens, 2008)that determines termination charges as a function of retail prices and show that thisapproach allows the regulator to increase penetration without distorting call volumes.

La Ley de Tecnologías de la Información y las Comunicaciones (L1341/09). Actualización de un marco legal para un sector en constante evolución

La necesidad de preparar al sector de tecnologías de la información y las comunicaciones para hacer frente a los desafíos que trae consigo el desarrollo de la convergencia en todas sus dimensiones, implicaba plantear un nuevo equilibrio entre la promoción del desarrollo competitivo del sector y el cumplimiento de los compromisos sociales de cobertura derivados de la naturaleza de servicio público que ostentan las telecomunicaciones. En consecuencia, desde comienzos de 2007 se trabajó, con una permanente retroalimentación intragubernamental y sectorial, en la estructuración de los pilares del Proyecto de Ley 112/07 Cámara - 340/08 Senado, que culminó en la sanción presidencial de la Ley 1341 el30 de julio de 2009. Este nuevo marco legal para un sector en constante evolución constituye un hito sin precedentes, que rompe con la tradición de más de diez años y seis intentos fallidos de ajuste legislativo e institucional.

Oligopoly Model of a Debit Card Network

JEL Classification: G21, L13.

Access by Capacity and Peak-Load Pricing

Several European telecommunications regulatory agencies have recently introduced a fixed capacity charge (flat rate) to regulate access to the incumbent's network. The purpose of this paper is to show that the optimal capacity charge and the optimal access-minute charge analysed by Armstrong, Doyle, and Vickers (1996) have a similar structure and imply the same payment for the entrant. I extend the analysis tothe case where there is a competitor with market power. In this case, the optimalcapacity charge should be modified to avoid that the entrant cream-skims the market,fixing a longer or a shorter peak period than the optimal. Finally, I consider a multiproduct setting, where the effect of the product differentiation is exacerbated.

Access by Capacity and Peak-Load Pricing

Several European telecommunications regulatory agencies have recently introduced a fixed capacity charge (flat rate) to regulate access to the incumbent's network. The purpose of this paper is to show that the optimal capacity charge and the optimal access-minute charge analysed by Armstrong, Doyle, and Vickers (1996) have a similar structure and imply the same payment for the entrant. I extend the analysis tothe case where there is a competitor with market power. In this case, the optimalcapacity charge should be modified to avoid that the entrant cream-skims the market,fixing a longer or a shorter peak period than the optimal. Finally, I consider a multiproduct setting, where the effect of the product differentiation is exacerbated.

The pricing of academic journals: A two-sided market perspective

More and more academic journals adopt an open-access policy, by which articlesare accessible free of charge, while publication costs are recovered through authorfees. We study the consequences of this open access policy on a journal s qualitystandard. If the journal s objective was to maximize social welfare, open accesswould be optimal as long as the positive externalities generated by its diffusionexceed the marginal cost of distribution. However, we show that if an open accessjournal has a different objective (such as maximizing readers payoffs, the impactof the journal or its profit), it tends to choose a quality standard below the sociallyefficient level.

Assessing High-Speed Internet Access in the State of Iowa: Sixth Assessment, January 2008

This Assessment gauges the availability of highspeed Internet access to both rural and non-rural Iowans. The Board continues to evaluate the progress in the deployment of high-speed Internet access through this Sixth Assessment, including information related to Internet speeds available to consumers and pricing of high-speed Internet services. Comparison of this Assessment with the earlier efforts is critical if a clear perspective on the developing availability of high-speed Internet access to all residents of the State of Iowa is desired.