Foreclosing Competition Through High Access Charges and Price Discrimination

This article analyzes competition between two asymmetric networks, an incumbent and a new entrant. Networks compete in non‐linear tariffs and may charge different prices for on‐net and off‐net calls. When access charges are high, this allows the incumbent to foreclose the market in a profitable way if switching costs are sufficiently large. In the absence of termination‐based price discrimination, however, such foreclosure strategies are not profitable.