Customer or Complementor? Intercarrier Compensation with Two-Sided Benefits

Benjamin Hermalin and Michael Katz ()

Competition Policy Center, Working Paper Series from Competition Policy Center, Institute for Business and Economic Research, UC Berkeley

Abstract: Both senders and receivers of telecommunications messages derive benefits, creating the possibility of externalities. We explore whether intercarrier compensation (i.e., access charges) can induce carriers to internalize these external effects. In important settings, access charges are irrelevant. Where they are relevant, access charges can induce an efficient ratio of off-net send and receive prices--taking their sum as given--but cannot induce the correct sum. The latter requires a mechanism for cross-carrier internalization, such as repeat play or pricing policies contingent on one another. Lastly, non-zero access charges can be efficient even in highly symmetrical situations.

Keywords: Access charge; intercarrier compensation; interconnection; two-sided markets (search for similar items in EconPapers)
Date: 2006-07-31
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Citations: View citations in EconPapers (5)

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Journal Article: Customer or Complementor? Intercarrier Compensation with Two‐Sided Benefits (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cdl:compol:qt9vf0k91t

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