A Retail Benchmarking Approach to Efficient Two-way Access Pricing:Two-Part Tariffs

We study a retail benchmarking approach to determine access prices forinterconnected networks. Instead of considering fixed access charges asin the existing literature, we study access pricing rules that determinethe access price that network i pays to network j as a linear functionof the marginal costs and the retail prices set by both networks. In thecase of competition in two-part tariffs, we consider a class of accesspricing rules, similar to the optimal one under competition in linearprices, derived by Jeon (2005), but based on average retail prices. Weshow that firms choose the variable price equal to the marginal costunder the class of rules. Therefore, the regulator can choose one amongthe rules to pursue additional objectives such as consumer surplus,network coverage or investment: in particular, we show that theregulator can achieve static and dynamic e±ciency at the same time.