Competitive Neutrality in Access Pricing

This article examines the notion of competitive neutrality when setting access prices for vertically integrated bottleneck networks. In contrast to the claims of regulated firms (for example, Telstra), it is not possible to argue that access charges that involve unit prices in excess of short-run marginal cost reflect competitive neutrality. That is, we demonstrate that in general models of downstream oligopoly, upstream prices that differ from marginal cost are not competitively neutral in the sense of placing integrated and non-integrated firms on an equal basis. Copyright 2005 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.