Internet telephony, bypass competition, and access charges

In this dissertation I explore how Internet technologies have paved the way for competition in certain telecommunications markets, and how theories of network competition can be used to explain the performance of such industries. I analyze the important role played by access charges, in settings of both "one-way" and "two-way" access, and where appropriate provide prescriptions for regulatory policy.;Chapter 2 analyzes a model of one-way access and the distortions implied by several access charge policies when perfectly competitive networks provide homogenous service over technologies with asymmetric usage costs. A regulatory authority chooses access charges for each network technology. In this environment I show that symmetric access charges distort market share in favor of the technology with higher per-minute usage costs. Due to the distortion in consumer selection among networks, the optimal symmetric access charge is not necessarily a weighted average of the optimal second-best asymmetric charges. Finally, I characterize situations in which exempting one type of network technology from paying access charges approximates the second-best solution from a welfare perspective.;Turning to models of two-way network competition, Chapter 3 takes a look back at the historical period of telephone competition in the United States. This chapter analyzes whether, in hypothesizing how telecommunications competition will unfold in the wake of the 1996 Telecommunications Act, current theoretical models can successfully explain the historical era.;Chapter 4 contributes to the literature of theoretical models of two-way network competition. In this chapter I demonstrate how a subtle distinction in the manner in which networks compete for customers can affect the need for regulatory oversight of the access price, using the local telephone market as a motivating example. Moreover, under several classes of demand functions I demonstrate that equilibrium profits are decreasing in a reciprocal access charge, as networks look to soften competition for marginal customers who are net receivers of phone calls---and thus generate positive access revenues whenever access is priced above marginal cost. Access charges below marginal cost maximize duopoly equilibrium welfare.