Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Bergen, Department of Economics

No 13/04: Synergies and non-discriminatory access pricing

Kåre P. Hagen (), Bjørn Hansen and Steinar Vagstad ()
Additional contact information
Kåre P. Hagen: NORWEGIAN SCHOOL OF ECONOMICS AND BUSINESS ADMINISTRATION, Postal: Helleveien 30, N-5045 Bergen, Norway
Bjørn Hansen: Telenor
Steinar Vagstad: University of Bergen, Department of Economics, Postal: Hermann Fossgt. 6, N-5007 Bergen, Norway

Abstract: According to the new European telecom regulation, incumbent operators are required to provide access to such bottlenecks on fair, reasonable and non-discriminatory terms. We explore different interpretations of this general rule in a model in which the bottleneck can be used by external (to the bottleneck firm) as well as internal service providers, and also derive some properties of the solution to the bottleneck owner’s maximization problem as well as that of a welfare-maximizing regulator. In particular, we derive an ECPR rule that also corrects for synergies. Next, by imposing certain symmetry requirements we establish a benchmark in which the external service provider is a competitive fringe and internal and external end-users face identical prices and buy identical quantities of the two services. This, we argue, can be dubbed a non-discrimination benchmark. We then show that introducing certain synergies makes the bottleneck want to favour external supply, while making the fringe less competitive has the opposite implication.

Keywords: access regulation; discrimination; ECPR; synergies

JEL-codes: L43; L51; L96

20 pages, November 6, 2004

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