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Access Pricing: A Comparison Between Full Deregulation and Two Alternative Instruments of Access Price Regulation, Cost-Based and Retail-Minus

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  • Paula Sarmento

    ()
    (CETE, Faculdade de Economia, Universidade do Porto)

  • António Brandão

    ()
    (CETE, Faculdade de Economia, Universidade do Porto)

Abstract

In this paper we compare two instruments of access price regulation, cost-based and retail-minus, with the full deregulation hypothesis. We consider an upstream monopolist firm that sells a vital input to an independent firm and to a subsidiary firm in the downstream market. We conclude that the retail-minus regulation avoids foreclosure and leads to better results than cost-based regulation in terms of investment level and consumer surplus. Moreover, retail-minus regulation allows a higher consumer surplus than deregulation of access price as long as the regulator carefully defines the retail-minus instrument. We also compare retail-minus regulation with the Efficient Component Pricing Rule and we conclude that the two mechanisms can lead to different results.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 0603.

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Length: 39 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:por:cetedp:0603

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Keywords: access regulation; vertical integration; retail-minus; Efficient Component Pricing Rule;

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Cited by:
  1. Francesc Trillas, 2008. "Regulatory federalism in network industries," Working Papers 2008/8, Institut d'Economia de Barcelona (IEB).
  2. Christian M. Bender & Georg Götz, 2011. "Coexistence of Service- and Facility-Based Competition: The Relevance of Access Prices for "Make-or-Buy"-Decisions," MAGKS Papers on Economics 201107, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  3. Andrea Gavosto & Guido Ponte & Carla Scaglioni, 2007. "Investment in Next Generation Networks and the Role of Regulation: A Real Option Approach," Working Papers Department of Economics 2007/31, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  4. Tselekounis, Markos & Xylogianni, Eirini & Varoutas, Dimitris & Martakos, Drakoulis, 2013. "Geographically differentiated NGA deployment," 24th European Regional ITS Conference, Florence 2013 88533, International Telecommunications Society (ITS).

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