By Organisation for Economic Co-Operation and Development
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Extra resources for Access Pricing in Telecommunications
The need to set the correct weights for each of these services could prove to be a sizeable obstacle for the regulator. A more serious critique to the use of price caps is that if the regulator allows price discrimination, as mentioned earlier, and if price discrimination of substitute products is not also allowed, the regulated firm may simply choose to not sell the product for which discrimination is not possible. As we will see later, in the context of access pricing, a firm subject to a price cap may simply refuse to sell access.
20 44 ACCESS PRICING IN TELECOMMUNICATIONS – ISBN 92-64-10592-1 – © OECD 2004 1. THE THEORY OF ACCESS PRICING One benefit of the global price cap especially deserves to be noted. The incentive on the monopolist to prevent or deny access depends on, amongst other things, the relative “tightness” of the regulation of final prices relative to access prices. , 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.
An analysis of the capacity costs required to provide that service quality (given demand, or subsequently, actual interconnect traffic figures) will enable costs to be apportioned among interconnecting parties. ”19 Since volumes of telecommunications traffic are not uniform over the course of a day or week, the maximum capacity of the network may only be reached during one hour per week or per month. If different firms have a different time profile of traffic, the charge for a use of capacity should vary according to the time of day and day of the week, to reflect the different degree of network congestion at different times.
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