By Organisation for Economic Co-Operation and Development
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Extra resources for Access Pricing in Telecommunications
2. Principles for regulation of the access prices of a natural monopoly We are now in a position to apply the principles set out above to the problem of regulating access prices. We will assume that the downstream industry is perfectly competitive. This assumption has the effect of allowing us to treat the downstream industry as though they are “final” customers – with no distinction between sales to rival firms and sales to final consumers. The above principles can then be applied without modification.
Held close to marginal cost) while final prices are loosely regulated or unregulated, the monopolist has an incentive to deny access in order to limit downstream competition, to earn greater rents in the downstream market. The opposite is true when access prices are loosely regulated and final prices are tightly regulated. One of the benefits of the global price cap is that, by treating access and final prices symmetrically, there is no incentive for the monopolist to prefer to sell at the access level or at the final level.
If mobile users are prepared to pay more for mobile operators with greater geographic coverage, mobile operators can crosssubsidise service in remote areas from some of the revenue from service provided in high density areas. But, it is occasionally argued that the level of 48 ACCESS PRICING IN TELECOMMUNICATIONS – ISBN 92-64-10592-1 – © OECD 2004 1. THE THEORY OF ACCESS PRICING mobile competition in high-density areas could be increased if new entrant mobile operators could obtain access to the networks of existing operators in remote areas.
Access Pricing in Telecommunications by Organisation for Economic Co-Operation and Development