ESSENTIALITY, EFFICIENCY, AND THE EFFICIENT COMPONENT-PRICING RULE

The determination of interconnection charges to essential facilities i s an important problem in regulated telecommunications markets in the wake of the Telecommunications Act of 1996. This paper defines mathema tical conditions for the essentiality of upstream productive inputs an d examines their implications for efficient interconnection pricing. T he paper shows conditions under which the efficient component-pricing rule (ECPR) can be derived as a special case of a Ramsey pricing rule. The paper also shows how efficient pricing differs from the ECPR for a number of interesting cases.