Price Squeezes and Vertical Discrimination on Next Generation Access Networks

26 Pages Posted: 13 Jul 2009 Last revised: 4 Sep 2014

Henry Ergas

University of Wollongong - SMART Infrastructure Facility; Deloitte Access Economics

Emma Lanigan

Concept Economics

Eric Kodjo Ralph

EKonomics LLC

Date Written: February 4, 2010

Abstract

Next generation access networks (NGANs) are in many cases likely to be supplied by vertically integrated firms, that is, firms that both wholesale access and sell services downstream to end-users. A long standing concern of regulators is that such firms may engage in anti-competitive price squeezes. This paper examines this concern and reviews the difficulties associated with conventional imputation tests in an NGAN context. The paper is organised as follows. Section 2 of the paper provides an analytical framework for understanding vertical integration, vertical discrimination, including price squeezes, and the incentives to engage in such behaviour. Section 3 explains why the incentives for a NGAN provider to vertically discriminate are sharply reduced as compared with a traditional vertically integrated telecommunications carrier. Section 4 considers regulatory approaches to the price squeeze. Section 5 focuses on how regulators are also concerned with inefficiently high prices and derives implications for the efficient setting of NGAN access charges.

Keywords: Next generation access networks, Price squeezes, Vertical integration, Vertical discrimination, Significant market power, Imputation tests, Broadband, Telecommunications

Suggested Citation

Ergas, Henry and Lanigan, Emma and Ralph, Eric Kodjo, Price Squeezes and Vertical Discrimination on Next Generation Access Networks (February 4, 2010). Available at SSRN: https://ssrn.com/abstract=1433170 or http://dx.doi.org/10.2139/ssrn.1433170

Henry Ergas (Contact Author)

University of Wollongong - SMART Infrastructure Facility ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Deloitte Access Economics ( email )

9 Sydney Avenue
Barton
Canberra, Kingston 2600
Australia

Emma Lanigan

Concept Economics ( email )

27 Jardine Street
PO Box 5430
Kingston, ACT 2604
Australia

Eric Kodjo Ralph

EKonomics LLC ( email )

706 S Milton Ave
Baltimore, MD 21224-3754
United States
+1-504-708-2342 (Phone)
+1-815-301-5449 (Fax)

HOME PAGE: http://www.ekonomicsllc.com

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