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

Author

Listed:
  • 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.

Suggested Citation

  • Paula Sarmento & António Brandão, 2006. "Access Pricing: A Comparison Between Full Deregulation and Two Alternative Instruments of Access Price Regulation, Cost-Based and Retail-Minus," CEF.UP Working Papers 0603, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:cetedp:0603
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    Cited by:

    1. Paul Madden & Mario Pezzino, 2013. "Sports League Quality, Broadcaster TV Rights Bids and Wholesale Regulation of Sports Channels," Economics Discussion Paper Series 1304, Economics, The University of Manchester.
    2. Briglauer Wolfgang & Götz Georg & Schwarz Anton, 2011. "Margin Squeeze in Fixed-Network Telephony Markets -- Competitive or Anticompetitive?," Review of Network Economics, De Gruyter, vol. 10(4), pages 1-21, December.
    3. Tselekounis, Markos & Varoutas, Dimitris & Martakos, Drakoulis, 2014. "A CDS approach to induce facilities-based competition over NGA networks," Telecommunications Policy, Elsevier, vol. 38(3), pages 311-331.
    4. Tselekounis, Markos & Varoutas, Dimitris, 2013. "Investments in next generation access infrastructures under regulatory uncertainty," Telecommunications Policy, Elsevier, vol. 37(10), pages 879-892.
    5. Trillas, Francesc, 2010. "Network industries and regulatory jurisdiction," IESE Research Papers D/859, IESE Business School.
    6. Francesc Trillas, 2008. "Regulatory federalism in network industries," Working Papers 2008/8, Institut d'Economia de Barcelona (IEB).
    7. Byun Jeong Wook & Kim Sung-Hwan, 2015. "The Effect of Vertically Differentiated Entry Under Retail-Minus Access Pricing," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(2), pages 747-767, April.
    8. Kim, Byung Woon & Park, Joonho & Youl Ko, Chang, 2013. "Cost allocation of WCDMA and wholesale pricing for mVoIP and data services," Telecommunications Policy, Elsevier, vol. 37(1), pages 35-47.
    9. Vitor Miguel Ribeiro, 2018. "Dark fiber price regulation in the absence of facilities-based competition," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(2), pages 243-278, June.
    10. Ben Dkhil, Inès, 2014. "Regulation and Investment in Telecom Network Infrastructure Facilities: The Recent Developments and Debates," MPRA Paper 72910, University Library of Munich, Germany, revised 02 Feb 2015.
    11. Bender, Christian M. & Götz, Georg, 2010. "Coexistence of service- and facility-based competition: The relevance of access prices for "make-or-buy"-decisions," 21st European Regional ITS Conference, Copenhagen 2010: Telecommunications at new crossroads - Changing value configurations, user roles, and regulation 3, International Telecommunications Society (ITS).
    12. Francesc Trillas, 2008. "Regulatory federalism in network industries," Working Papers 2008/8, Institut d'Economia de Barcelona (IEB).
    13. Ben Dkhil, Inès, 2014. "Investment in Fixed Broadband Networks and Access Regulation in Developed and Developing countries: Panel Data Applications," MPRA Paper 59337, University Library of Munich, Germany.
    14. 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 - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    15. 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).
    16. Michael L. Polemis & Markos Tselekounis, 2022. "Upstream regulation and non-separable innovation," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(2), pages 301-312, June.

    More about this item

    Keywords

    access regulation; vertical integration; retail-minus; Efficient Component Pricing Rule;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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