Abstract

CASTANEDA SABIDO, Alejandro. A Review of the Interconnection Literature and Policy Proposals for Mexico. Gest. polít. pública [online]. 2011, vol.20, n.1, pp.173-209. ISSN 1405-1079.

There has been an increase in papers in the economics literature that analyze interconnection issues. Most of these papers are highly technical and not readily accessible for people not trained in the economics tradition but oriented towards the study of telecommunications issues. This paper reviews the literature on interconnection by simplifying the technicalities and positing in an intuitive way the main arguments that are relevant for the practical analysis of interconnection. The paper is a bridge between the analytic literature and the practical job of studying interconnection issues. The paper studies one-way-interconnection and two-way-interconnection. We study the literature on efficient component pricing rule (ECPR), price caps and regulation based upon long run incremental cost. We also study interconnection models in two ways, the potential incentives for collusion and the incentives to price discriminate. We also study the issue of the high charges for mobile termination. We rationalize this as a competitive bottleneck and we relate this result with the disadvantages of the calling party pays scheme. In the end we make policy proposals that attempt to reduce market power issues that emerge in the interconnection analysis. The proposals also diminish the incentives to discriminate between onnet calls and offnet calls. In the policy proposals section we discuss schemes such as bill and keep and cost based regulation as tools that attempt to solve the interconnection problems that we find.

Keywords : interconnection; collusion; average incremental cost; cap prices.