With Network Externalities, Asymmetric Telecommunications Competition And Regulation

It is supposed that competition will lead to efficiency, however, because of the technology of telecommunication industry, increasing the competitors does not necessarily leads to efficiency. In the movement of bringing competition into telecommunication industry, access pricing is the where the shoe pinches to bring efficiency. Laffront, Rey and Tirole have done in-depth research on telecommunication competition from the perspective of access pricing. They established framework and pointed out that tele-competition should be regulated, while access regulation is the key. Besides, they established theoretical basis of regulation on interconnection in telecommunication industry.Previous research on access regulation is based on some kinds of market structure and regulation method. Integrated with the telecommunication circumstance of our country, this article relaxes the assumption and launches an in-depth investigation into asymmetric tele-competition from the perspective of network externalities.First, we brief the regulation of China telecommunication industry, including the process of bringing competition, efficiency, interconnection policy. In the third chapter, we introduce basic model of one-way and two-way access pricing, and the theoretical results show that open in telecommunication industry does not necessarily lead to competition and regulation is necessary.In the forth chapter, asymmetric tele-competition model is established, and the results show that incumbent in the industry enjoys great advantage in the competition because of network externalities. If access price exceeds access cost, incumbent can expand its market share with lower retail price. The entrant's retail price increase by the time, and average retail price remains the same. Still this article discussed how to regulated the access price to avoid the "the Matthew effect"Based on the analysis of the model and the condition of our telecommunication industry, this article proposes regulation methods in China telecommunication industry.