THE REVENUE‐SHARING RULE FOR INTERCONNECTION CHARGES*

Jeong-Yoo Kim and Yoonsung Lim

The Japanese Economic Review, 2004, vol. 55, issue 3, 298-310

Abstract: In this paper we explore the economic principle behind the revenue‐sharing rule for interconnection charges. Our main finding is that symmetric firms can collude by splitting the revenues equally. We further characterize the optimal revenue‐sharing ratio and discuss the relationship between optimal ratio and the optimal access price. We also show that the revenue‐sharing rule can have the perverse effect of inducing a firm to raise its own costs in order to gain a higher share of revenues.

Date: 2004
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