Edited by Michael A. Crew and David Parker
Chapter 13: The Economics of Access and Interconnection Charges in Telecommunications
Timothy J. Tardiff Introduction In telecommunications and other industries, certain providers must rely on other firms when delivering products and services to their customers. While this situation is not new, the nature of such dependencies (or interdependencies), as well as the economic analysis that suggests how such arrangements should be priced, are becoming increasingly complex as technologies advance and formerly separate markets converge. The following examples of interconnection and access arrangements from the telecommunications industry – the empirical focus of this chapter – illustrate the myriad ways in which firms and regulators have addressed the need for firms to exchange certain critical inputs and set prices for such facilities, services and transactions: (1) two adjacent, non-competing, telephone networks establish facilities so that subscribers on one network can call the subscribers on the other; (2) long-distance carriers obtain access to the facilities of a local service provider and compete against that provider in providing long-distance services to a common customer base; (3) traditional wireline telephone and new wireless (mobile) carriers establish interconnection arrangements so that subscribers of a traditional phone service can call wireless subscribers, and vice versa; (4) new competitive local telephone carriers obtain certain network elements from the incumbent carrier and at the same time establish interconnection arrangements, so that they can both capture subscribers in the common service territory and allow their subscribers to call subscribers that remain on the incumbent’s network; (5) customers of the incumbent telephone carrier make telephone calls to their dial-up Internet Service Provider, which in...
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