By Organisation for Economic Co-Operation and Development
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Extra info for Access Pricing in Telecommunications
THE THEORY OF ACCESS PRICING substitutes (which may be the most likely case) the relationship between the access prices and the retail prices of the incumbent should be given by the simple form of the ECPR. Specifically, the access price for unbundled local loop should be equal to the marginal cost of providing the local loop plus an appropriate contribution to fixed costs earned by the incumbent on its use of the local loop. In the case of perfect substitutes the correct relationship between access prices and retail prices can be achieved either by taking the retail prices as given and setting the access prices accordingly, or by setting the access prices and allowing competition to drive the retail prices to the required level.
This principle applies to both the fixed and the access component of a two-part final price. See the first few examples in Box 2. Assume now that direct taxes on final services cannot be discriminatory. Suppose that, while it is possible for the monopolist to price discriminate in its own sales to final customers, it is not possible to determine the identity of the corresponding final consumer of the regulated firm’s competitors, so that it cannot price discriminate as efficiently in its sales of the access service.
THE THEORY OF ACCESS PRICING Figure 3. Price discrimination in access prices and final prices Monopolist M 2. and it is efficient to use price discrimination in access prices (including two-part pricing and so on). 1. It is efficient to use price discrimination in final services (two part pricing and so on)... 4. price discrimination in final services must be prevented... C 3. BUT where it is not feasible to use price discrimination in access services... 5. otherwise either competition will be prevented or the monopolist will be prevented from using an efficient price structure.
Access Pricing in Telecommunications by Organisation for Economic Co-Operation and Development