Creating competition through interconnection: Theory and practice

The determination of interconnection charges is the key to the introduction of competition in telecommunications, electricity, gas, postal services, and several other industries. The paper first recaps standard regulatory policies for interconnection. It then provides a simple account of theoretical considerations in the matter of setting access charges, and analyzes existing policies in this light. in view of the shortcomings of these policies, it proposes a new and simple rule, labelled global price cap, which is theoretically more satisfactory and informationally no more and often less demanding than existing rules.