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The ambivalence of two-part tariffs for bottleneck access
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Two-part tariffs, when used at the retail level, increase efficiency by lowering the price of marginal
units. The same potential for higher efficiency exists for two-part tariffs at wholesale level for a given
market structure, but the fixed part of the wholesale tariff can negatively affect the latter. In a
simulated competition model of next-generation telecommunications access networks that has been
calibrated with engineering cost data, we show that the latter effects strongly outweigh the former.
That is, substituting a cost-based linear wholesale access tariff with revenue-equivalent two-part
tariffs reduces the number of access seekers and therefore leads to higher prices and lower welfare
and consumer surplus.