Network competition with price discrimination: 'bill-and-keep' is not so bad after all

We study the impact of access charges on the incentives to invest in competing telecommunications networks of different quality. High access charges soften competition in the investment stage and can be used to sustain higher profits under competition with two-part tariffs and termination-based price discrimination. Below-cost charges (such as bill-and-keep arrangements) have a positive impact on investments. (C) 2003 Elsevier B.V. All rights reserved.