Network interconnection with competitive transit

We examine the interaction between two interconnected networks (e.g., two local exchange carriers (LECs)) and a third network (e.g., an interexchange carrier (IXC)) seeking access to their customer base. The IXC could either interconnect with both LECs or interconnect with only one LEC and transit calls to the other LEC via the first LEC s network. We show that there is a wide set of cases in which competitive transit could justify partial or even complete deregulation of access to a network s customer base. 2004 Elsevier B.V. All rights reserved. JEL classification: L51; L96