The Pricing of Inputs Sold to Competitors

Local telephone companies have long been regulated as natural monopolies. However, technological innovation and the prospect of falling regulatory barriers to entry now expose some portions of the local exchange to competition from cable television systems, wireless telephony, and rival wireline systems. Nevertheless, it is probable that certain parts of local telephony will remain naturally monopolistic. In these cases the local exchange carrier must be permitted to sell necessary inputs to its competitors in the market for final telecommunications products at a price that reflects all its costs, including opportunity costs. The authors\u27 analysis applies to any network industry. Thus, it is useful in antitrust analysis of essential facilities and in regulatory analysis of transportation, energy transmission, pipelines, and mail delivery

The Pricing of Inputs Sold to Competitors: Rejoinder and Epilogue

In this piece, Baumol and Sidak respond to comments on their earlier essay on telecommunications that appeared in the Winter, 1994 issue of this Journal. They also comment on the reaction to their essay by the New Zealand Privy Council