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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

Suggested Citation

  • Foros, Oystein & Kind, Hans Jarle & Sorgard, Lars, 2002. "Access Pricing, Quality Degradation, and Foreclosure in the Internet," Journal of Regulatory Economics, Springer, vol. 22(1), pages 59-83, July.
  • Handle: RePEc:kap:regeco:v:22:y:2002:i:1:p:59-83
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    Cited by:

    1. 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.
    2. repec:pra:mprapa:42457 is not listed on IDEAS
    3. 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.
    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. Thomas Cortade & Edmond Baranes, 2007. "Fusions horizontales sur le marché de l'Internet," Économie et Prévision, Programme National Persée, vol. 178(2), pages 67-77.
    6. 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.
    7. David Mandy & David Sappington, 2007. "Incentives for sabotage in vertically related industries," Journal of Regulatory Economics, Springer, vol. 31(3), pages 235-260, June.
    8. 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.

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