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Access Pricing, Quality Degradation, and Foreclosure in the Internet

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  • Foros, Oystein
  • Kind, Hans Jarle
  • Sorgard, Lars

Abstract

Access to both a local and a global network is needed in order to get complete connection to the Internet. The purpose of this article is to examine the interplay between those two networks and how it affects the domestic public policy towards a domestic provider of local access. We find that a cost-oriented regulation is detrimental to domestic welfare, because it shifts profit to the foreign provider of global access. The optimal policy is that the regulator commits itself to set an access price above costs, possibly the same price as in an unregulated market economy. A regulation of the global access price has a non-monotonic effect on domestic welfare, and there is a potential conflict between international and domestic regulation policy. Copyright 2002 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Regulatory Economics.

Volume (Year): 22 (2002)
Issue (Month): 1 (July)
Pages: 59-83

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Handle: RePEc:kap:regeco:v:22:y:2002:i:1:p:59-83

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Web page: http://www.springerlink.com/link.asp?id=100298

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Cited by:
  1. David Mandy & David E. M. Sappington, 2004. "Incentives for Sabotage in Vertically Related Industries," Working Papers 0404, Department of Economics, University of Missouri, revised 16 Dec 2004.
  2. D'Ignazio, Alessio & Giovannetti, Emanuele, 2009. "Asymmetry and discrimination in Internet peering: evidence from the LINX," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 441-448, May.
  3. repec:pra:mprapa:42457 is not listed on IDEAS
  4. Joan Calzada & Francesc Trillas, 2005. "The interconnection prices in telecomunications: from theory to practice," Hacienda Pública Española, IEF, vol. 173(2), pages 85-125, June.
  5. Krämer, Jan & Wiewiorra, Lukas, 2009. "Network neutrality and congestion sensitive content providers: Implications for content variety, broadband investment and regulation," MPRA Paper 42519, University Library of Munich, Germany, revised 15 Jan 2012.
  6. Kidokoro, Yukihiro, 2007. "A model of Internet access when Internet connection speed is upgradable," Information Economics and Policy, Elsevier, vol. 19(1), pages 80-94, March.
  7. D’Ignazio, A. & Giovannetti, E., 2006. "‘Unfair’ Discrimination in Two-sided Peering? Evidence from LINX," Cambridge Working Papers in Economics 0621, Faculty of Economics, University of Cambridge.

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