(A) study on access price regulation in telecommunications industry

Abstract

Regulatory reforms in network industry have deregulated restrictions on the ownership and market strcture. It results in a significant entry into the market and an increased trend toward competition on the parts of existing regulated utilities. Competition in network industries produces substantial changes in the way the industry operates that rival firms competing in the non-natural monopoly components of network has to gain access to bottleneck facilities. Since a vertically integrated dominant firm controls the supply of a key input to its competitors, it raised the access pricing problem, one of the most difficult competition policy question in deregulated network industries. The issue of how to set the terms of access to bottleneck inputs has received much attention in recent years and still has been a key subject of contentious debates in competition policy of network utilities due to varieties of circumstance in which the access pricing problem occurs. Recognizing access pricing problems should be dealt with taking account of those varieties, our thesis attempts to find optimal access price under different industrial strctures. Our research consists of the following four parts investigating (i) recent regulatory issues in access pricing (ii) optimal access price under bypass (iii) non-discriminatory access pricing for multiple entrants (iv) optimal access pricing principle in two-way interconnection. The analysis in part (ii) shows that bypass decreases the optimal access price because it reduces the entrant``s dependence on the incumbent facilities. It implies tat if the entrant``s decision does not affect on the incumbent``s profit, the entrant need not to compensate for the incumbent``s lost contribution. In part (iii), we seek a non-discriminatory rule of access pricing. Recognizing potential inefficiency due to equity consideration that regulator normally cannot price-discriminate one entrant against another, we propose a self-selection two-part t...