Price Squeezes and Vertical Discrimination on Next Generation Access Networks
University of Wollongong - SMART Infrastructure Facility; Deloitte Access Economics
Eric Kodjo Ralph
February 4, 2010
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.
Number of Pages in PDF File: 26
Keywords: Next generation access networks, Price squeezes, Vertical integration, Vertical discrimination, Significant market power, Imputation tests, Broadband, Telecommunications
Date posted: July 13, 2009 ; Last revised: September 4, 2014