In this paper, I analyze the effect of bottleneck facilities (i.e. local network) on the competition of long distance market where only two companies exist.
If only one company has local network, it can drive out the other by pricing too high access charge. In case both of them have their own local network, each provide the same amount of long distance service and take equal profit, though the local network is not symmetric, from the long distance market.
In both cases, competition between companies does not ensure the maximization of social welfare. Social welfare can be maximized by regulating the access charges. But, regulation bring about some problem such as negative profit of company. Therefore, regulator should consider appropriate access price scheme under constraint.
