 Efficient Intercarrier Compensation for Competing Networks When Customers Share the Value of A CallPatrick Degraba Journal of Economics & Management Strategy, 2003, vol. 12, issue 2, 207-230 Abstract: In competitive telecommunications markets each carrier relies on competing networks to terminate internetwork calls. Regulators typically require the calling party's network to pay a termination fee to the called party's network equal to the terminating network's “incremental cost” of completing the call, effectively imposing all of the costs on the calling party's network. These payments can affect retail prices and therefore consumption. I show that when both parties benefit from a call, they should bear its costs in proportion to the benefit they receive. Therefore, imposing all of the costs of an internetwork call on the calling party's network can be inefficient if these costs are reflected in the calling party's usage rates. A system in which two networks exchange traffic at specified points on a bill‐and‐keep basis imposes some of the cost on each network, which will then be imposed on the parties. This can generate more efficient network utilization, even with unbalanced traffic between networks. Thus, regulators may improve the efficiency of telecommunications markets by establishing bill‐and‐keep intercarrier compensation rules. Date: 2003 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:12:y:2003:i:2:p:207-230 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Journal of Economics & Management Strategy from Wiley Blackwell |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.