General Access Payment Mechanisms

  • Izak Atiyas
  • Toker Doganoglu
  • Martin Reichhuber
Part of the Contributions to Economics book series (CE)


Despite the voluminous literature documenting their problems, per unit access pricing mechanisms are the most common ones used in practice. Interestingly, neither legal documents nor theoretical work on access payments provide any justifications for restricting access payments to per-unit charges. In this paper, we examine the properties of general one-way access payment mechanisms where payments from the entrants to the incumbent are expressed as functions of retail prices. We find that by imposing a linear access pricing mechanism the regulator can implement any pair of retail prices, including the first best. We also show that a per-unit access mechanism, including one which is cost-based, is incapable of implementing the first-best outcome. Moreover, we obtain a partial welfare ordering of payment mechanisms in that any linear access payment mechanism that depends negatively on the incumbent’s price and positively on the entrant’s price generates desirable outcomes with higher consumer welfare than payment mechanisms where parameters have the opposite signs.


Retail Price Allocative Efficiency Retail Prex Access Price Access Charge 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. Armstrong M (2002) The theory of access pricing and interconnection. In: Caves ME, Majumdar SK, Vogelsang I (eds), The Handbook of Telecommunication Economics. Elsevier, Boston, MA, Vol. 1, pp. 295–384Google Scholar
  2. Armstrong M, Doyle C, Vickers J (1996) The access pricing problem: a synthesis. Journal of Industrial Economics, 44(1), 131–150CrossRefGoogle Scholar
  3. Baumol W, Sidak J (1994) The pricing of inputs sold to competitors. Yale Journal on Regulation, 11(1), 171–202Google Scholar
  4. Doganoglu T, Reichhuber M (2007) An Interconnection Settlement Based on Retail Prices. Mimeo. Sabanci University/University of MunichGoogle Scholar
  5. Economides N, White L (1995) Access and interconnection pricing: how efficient is the: “Efficient Component Pricing Rule”? Antitrust Bulletin, XL(3), 557–579Google Scholar
  6. European Commission (2007) Commission Staff Working Document – Annex to the Communication from the Commission to the European Parliament, The Council, The European Economic and Social Committee and the Committee of the Regions European Electronic Communications Regulation And Markets 2006 (12th Report),’ Volume 1 [COM(2007) 155]Google Scholar
  7. FCC US Federal Communications Commission (1997) Report and Order in the Matter of International Settlement Rates. FCC 97-280, IB Docket No. 96-261Google Scholar
  8. Gabel DJ (2002) A competitive market approach to interconnection payments in the US. In Mansell R, Samarajiva R, Mahan A (eds), Networking Knowledge for Information Societies: Institutions and Intervention. Delft University Press, The Netherlands, pp. 132–140Google Scholar
  9. Gans JS (2006) Access pricing and infrastructure investment. In Haucap J, Dewenter R (eds), Access Pricing: Theory and Practice. Elsevier Science, Amsterdam, pp. 41–64Google Scholar
  10. Gans JS, King SP (2004) Access holidays and the timing of infrastructure investment. Economic Record, 80(248), 89–100CrossRefGoogle Scholar
  11. Gans JS, Williams PL (1999) Access regulation and the timing of infrastructure investment. Economic Record, 79(229), 127–138CrossRefGoogle Scholar
  12. Gautier A (2006) Network financing with two-part and single tariffs. In Haucap J, Dewenter R (eds), Access Pricing: Theory and Practice. Elsevier, Amsterdam, pp. 65–90Google Scholar
  13. Haucap J, Dewenter R (eds) (2006) Access Pricing: Theory and Practice, Elsevier, AmsterdamGoogle Scholar
  14. Kahai SK, Kahai PS, Leigh A (2006) Traditional and non-traditional determinants of accounting rates in international telecommunications. International Advances in Economic Research, 12, 505–522CrossRefGoogle Scholar
  15. Laffont JJ, Tirole J (1994) Access pricing and competition. European Economic Review, 38(2), 1673–1710CrossRefGoogle Scholar
  16. Laffont JJ, Tirole J (2000) Competition in telecommunications. Cambridge, MA: MIT pressGoogle Scholar
  17. Mason R (1998) Internet telephony and the international accounting rate system. Telecommunications Policy, 22(11), 931–944CrossRefGoogle Scholar
  18. Noam E (2001) Interconnecting the network of networks, MIT Press, Cambridge, MAGoogle Scholar
  19. OECD (2004) Access pricing in telecommunications. OECD, ParisGoogle Scholar
  20. Rohlfs J (1979) Economically-efficient bell-system pricing. Bell Laboratories Discussion Paper No. 138Google Scholar
  21. Temin P (2003) Continuing confusion: entry prices in telecommunications. In Guinnane T, Sundstrom VA, Whately W (eds.), History Matters. Stanford University Press, Stanford, pp. 163–186Google Scholar
  22. Valletti TM (1998) Two-part access prices and imperfect competition. Information Economics and Policy, 10(3), 305–323CrossRefGoogle Scholar
  23. Valletti TM (1999) The practice of access pricing: telecommunications in the United Kingdom. Utilities Policy, 8, 83–98CrossRefGoogle Scholar
  24. Vogelsang I (2003) Price regulation of access to telecommunications networks. Journal of Economic Literature, XLI, 830–862CrossRefGoogle Scholar
  25. Vogelsang I, Mitchell BM (1997): Telecommunications Competition: the Last Ten Miles. AEI Press, Cambridge/LondonGoogle Scholar
  26. Wallsten S (2001) Telecommunications investment and traffic in developing countries: the effects of international settlement rate reforms. Journal of Regulatory Economics, 20(3), 307–323CrossRefGoogle Scholar
  27. WIK EAC (1994) Network interconnection in the domain of ONP. (Study for DG XIII of the European Commission)Google Scholar
  28. Willig R (1979) The theory of network access pricing. In Trebing H (ed), Issues in Public Utility Regulation. Michigan State University Press, East Lansing, MI, pp. 109–152Google Scholar
  29. Wright J (1999) International telecommunications, settlement rates, and the FCC. Journal of Regulatory Economics, 15(3), 267–292CrossRefGoogle Scholar

Copyright information

© Physica-Verlag Heidelberg 2009

Authors and Affiliations

  • Izak Atiyas
    • 1
  • Toker Doganoglu
    • 1
  • Martin Reichhuber
    • 1
  1. 1.Sabanci UniversityIstanbul

Personalised recommendations