Why is on-net traffic cheaper than off-net traffic? Access markup as a collusive device and a barrier to entry.

Received literature have shown that if competing networks are restricted to linear and uniform pricing, high access charges can facilitate collusion; a result that breaks down if we allow for non-linear and discriminatory pricing, however. We show that by adding unbalanced calling pattern to the model, incentives for high access charges are restored. High access charges may make the firms collude on high prices. Moreover, when allowing for entry, we show that incumbents can profitably charge high access prices as a device to deter or soften entrants