Efficient Interconnection Charges and Capacity-Based Pricing
32 Pages Posted: 8 Feb 2009
There are 3 versions of this paper
Efficient Interconnection Charges and Capacity-Based Pricing
Efficient Interconnection Charges and Capacity-Based Pricing
Efficient Interconnection Charges and Capacity-Based Pricing
Date Written: February 8, 2009
Abstract
Capacity-based interconnection (CBI) prices vary exactly with the costs a network provider incurs when supplying an interconnecting party. That is, they equal incremental costs, rather than being averaged over any output measure. We argue such prices (1) are as practicable and more efficient than per minute rates based on long run incremental cost, (2) are more efficient than bill and keep, and (3) with mark-ups for cost recovery, are a practical and relatively efficient means of pricing wholesale interconnection services, being well-suited to both circuit and packet-based networks. [A shorter version of this paper was subsequently published in Journal of International Economics and Economic Policy.]
Keywords: Capacity-based interconnection, bill-and-keep, long run incremental cost pricing, call termination
JEL Classification: L51, L96
Suggested Citation: Suggested Citation