Pricing Access to Internet Service Providers

Overview

This paper studies the efficient pricing of termination services for calls that are made to Internet Service Providers (ISPs). A model is presented in which an incumbent phone network is obligated to provide local calls at a regulated per-minute price while entrant carriers compete to terminate ISP-bound calls. This model is used to understand the problems of regulatory arbitrage that arise when termination charges for ISP-bound calls are not regulated or set reciprocally. Different solutions to the pricing of terminating ISP-bound calls are evaluated.