Asymmetric Network Interconnection

We develop a model of competition between interconnected networks,that allows for carriers to differ in size. Under two-partpricing, we show that because of asymmetry the larger network willalways prefer a reciprocal interconnection charge be set at cost.For sufficiently large asymmetry the smaller network will have thesame preference. Under the assumptions of our model a particularly simple regulation is optimal – if carriers cannot agree on the terms of interconnection, the larger carrier is entitled to select the access price which is then applied reciprocally.