Network shares and retail prices are not symmetric in the telecommunications market with multiple bottlenecks which give rise to new questions of access fee regulation. In this paper we consider a model with two types of asymmetry arising from different entry timing, i.e. a larger reputation for the incumbent and lower cost of servicing for the entrant as a result of more advanced technology. As a result firms have divergent preferences over the access fee. In case of linear and non-linear prices the access fee might still act as the instrument of collusion, but only if a side-payment is permitted which is generally welfare decreasing. Moreover, in contrast with the European regulatory framework, the access fee on the basis of termination cost might not necessarily be a socially preferable solution.

access fee, brand loyalty, cost asymmetry, imperfect competition, network interconnection
Production, Pricing, and Market Structure; Size Distribution of Firms (jel L11), Oligopoly and Other Imperfect Markets (jel L13), Economics of Regulation (jel L51), Telecommunications (jel L96)
hdl.handle.net/1765/6927
Tinbergen Institute Discussion Paper Series
Tinbergen Institute

Kocsis, V. (2005). Network Asymmetries and Access Pricing in Cellular Telecommunications (No. TI 05-085/1). Tinbergen Institute Discussion Paper Series. Retrieved from http://hdl.handle.net/1765/6927