Abstract
This paper investigates how outgoing and incoming access effects and outgoing and incoming call effects can be internalized by efficient pricing in telephone networks. We find that both caller pays and receiver pays usage pricing are needed to internalize all call effects when consumers use caller ID. The sum of the efficient caller pays and receiver pays usage prices for any call is always less than or equal to the cost of that call. These efficient usage prices internalize not just all call effects but also all access effects implying that access should be priced at its marginal cost.
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