Promoting Efficient Competition in Telecommunications

Abstract

Competition in telecommunications is being promoted throughout the world with extensive liberalisation occurring in many countries. Past monopoly provision means that the new era of competition features large incumbent operators. The traditional lack of rivalry means that to accommodate competition liberalisation entails the entry of new operators. These conditions could prompt incumbents to abuse their dominant position when confronted with new entry. Foreclosure problems in telecommunications are potentially very acute because successful entry is dependent on the incumbent offering interconnection. The services provided through interconnection, such as call origination and call termination, and the charges levied for these services, access prices, lie at the heart of pro-competitive measures. The access prices set by incumbents will require scrutiny In practice regulatory authorities face difficulties in evaluating access prices that balance the competing claims of the incumbent and entrants, and ensure that reasonable prices are established which are compatible with the promotion of efficient competition. In this article I outline some theoretical contributions on access pricing which have helped regulators to design regulatory regimes to promote efficient competition.