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The theory of access pricing : an overview for infrastructure regulators

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  • Valletti, Tommaso M.
  • Estache, Antonio

Abstract

An important component of policies to promote effective competition among all segments of network industries (such as electricity, telecommunications, or railways) is a regulatory environment guaranteeing that competitors have access to the services of potential"bottleneck"facilities too costly to duplicate. Rules covering fair access to these facilities - including fair access prices - generally improve economic efficiency by easing competition in markets both upstream and downstream from the bottleneck. Appropriate access pricing rules are especially needed when a dominant firm controls the supply of one or more inputs -- for example, gas transportation, electricity transmission, local telecommunication access, or railway track -- vital for its competitors. Access pricing is part of the antitrust concern central to the so-called essential facilities doctrine covered by U.S. legislation. It is also related broadly to such competition policy issues as quantity discounts, cross-subsidies, tie-ins, refusals to deal or unbundle, exclusive dealing, and predatory pricing. Access pricing is one of the most important and controversial questions in regulating infrastructure services. This complexity stems partly from the practical fact that access rules can be discussed only with reference to the rest of the regulatory environment, since regulators have many goals and constraints. In their survey of access pricing, the authors try to make it clear that access rules should not be assigned too many expectations. There are a few things access prices already do, however, and should continue doing until an all-encompassing solution comes along. Their survey covers access rules for both vertically unbundled and vertically integrated industries. It addresses the question: what happens if access is left unregulated? And it discusses the main challenges to implementation: calculating and allocating costs, finding a usage-based solution to the access pricing problem (the global price cap), and monitoring anticompetitive behavior (partial caps or adjusted global caps).

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2097.

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Date of creation: 30 Apr 1999
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Handle: RePEc:wbk:wbrwps:2097

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Keywords: Payment Systems&Infrastructure; Economic Theory&Research; Labor Policies; Environmental Economics&Policies; Markets and Market Access; Economic Theory&Research; Environmental Economics&Policies; Markets and Market Access; Access to Markets; Knowledge Economy;

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Cited by:
  1. Giovannetti, E., 2000. "Interconnection, Differentiation and Bottlenecks in the Internet," Cambridge Working Papers in Economics 0011, Faculty of Economics, University of Cambridge.
  2. Kao, Tina & Menezes, Flavio & Quiggin, John, 2012. "Optimal access regulation with downstream competition," Risk and Sustainable Management Group Working Papers 151201, University of Queensland, School of Economics.
  3. Aldaba, Rafaelita M., 2003. "Regulatory Policies and Reforms in the Power and Downstream Oil Industries," Discussion Papers DP 2003-16, Philippine Institute for Development Studies.
  4. Gustavo Ferro & Omar Chisari, 2010. "Tópicos de Economía de la Regulación de los Servicios Públicos," Working Papers hal-00473038, HAL.
  5. Kurakawa, Yukihide, 2013. "The optimal vertical structure in the electricity industry when the incumbent has a cost advantage," Energy Policy, Elsevier, vol. 63(C), pages 622-627.
  6. Markos Tselekounis & Dimitris Varoutas & Drakoulis Martakos, 2012. "On the social optimality of make-or-buy decisions," Journal of Regulatory Economics, Springer, vol. 41(2), pages 238-268, April.
  7. Gabriel Godofredo Fiuza de Bragança, 2005. "A Remuneração de Redes nas Telecomunicações e a Nova Orientação a Custos: Avaliação e Perspectivas Para a Telefonia Fixa Brasileira," Discussion Papers 1104, Instituto de Pesquisa Econômica Aplicada - IPEA.
  8. Frank Bickenbach & Lars Kumkar & Rüdiger Soltwedel, 1999. "The New Institutional Economics of Antitrust and Regulation," Kiel Working Papers 961, Kiel Institute for the World Economy.

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