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Access and Interconnection Pricing: How Efficient is the Efficient Component Pricing Rule?

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  • Nicholas Economides
  • Lawrence J. White

Abstract

This paper critiques some of the properties of the so-called "efficient component pricing rule" (ECPR) for access to a bottleneck (monopoly) facility. When an entrant/rival and the bottleneck monopolist both produce a complementary component to the bottleneck service, the ECPR specifies that the access fee paid by the rival to the monopolist should be equal to the monopolist's opportunity costs of providing access, including any forgone revenues from a concomitant reduction in the monopolist's sales of the complementary component. We focus especially on the case in which the monopolist's price for the complementary component is above all relevant marginal costs. In this case the ECPR's exclusion of rivals may be socially harmful, since it may be preventing a substantial decrease in the price of the complementary component.

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Bibliographic Info

Paper provided by New York University, Leonard N. Stern School of Business, Department of Economics in its series Working Papers with number 95-04.

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Date of creation: Oct 1995
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Handle: RePEc:ste:nystbu:95-04

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Postal: New York University, Leonard N. Stern School of Business, Department of Economics, 44 West 4th Street, New York, NY 10012-1126
Phone: (212) 998-0860
Fax: (212) 995-4218
Web page: http://w4.stern.nyu.edu/economics/
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Cited by:
  1. Laura Baraldi, 2004. "Esternalita' Di Rete: Una Rassegna," Working Papers 12_2004, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  2. Marcel Boyer, 1997. "Competition and Access in Telecoms: ECPR, Global Price Cap, and Auctions," CIRANO Working Papers 97s-03, CIRANO.
  3. Carlo Cambini, 2000. "Competition between Vertically Integrated Networks: a Generalized Model," ICER Working Papers 01-2000, ICER - International Centre for Economic Research.
  4. Carlos Diaz & Raimundo Soto, . "Open-Access Issues in the Chilean Telecommunications and Electricity Sectors," ILADES-Georgetown University Working Papers inv124, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  5. Carlo Cambini & Piercarlo Ravazzi & Tommaso Valletti, 2000. "La tariffazione dell'accesso nelle telecomunicazioni: principi economici e interventi regolatori in alcuni paesi industrializzati," ICER Working Papers 10-2000, ICER - International Centre for Economic Research.
  6. Herguera-García, Iñigo & Aguilar-Barceló, José G., 2004. "El papel de las tarifas de interconexión en las industrias en red
    [The role of interconnection charges in network industries]
    ," MPRA Paper 4733, University Library of Munich, Germany, revised Jan 2004.
  7. Toker Doganoglu & Yair Tauman, 1996. "Network Competition with Reciprocal Proportional Access Charge Rules," Industrial Organization 9611001, EconWPA, revised 14 Nov 1996.
  8. Nicholas ECONOMIDES, 2011. "Broadband Openness Rules Are Fully Justified by Economic Research," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(84), pages 127-151, 4th quart.
  9. Kaisa Kotakorpi, 2002. "Access Pricing and Competition in Telecommunications," Discussion Papers 283, Government Institute for Economic Research Finland (VATT).
  10. Ricardo Raineri, 2004. "Telecommunication Network Competition: An Equilibrium Analysis," Econometric Society 2004 Latin American Meetings 182, Econometric Society.
  11. Marcel Boyer & Jacques Robert, 1997. "Competition and Access in Electricity Markets: ECPR, Global Price Cap, and Auctions," CIRANO Working Papers 97s-41, CIRANO.

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