ABSTRACT
This chapter examines the settlements problem that arises with multiple networks, and discusses some of the difficulties this presents for effective implementation of congestion prices. Specifying the appropriate congestion price makes it possible to decentralize decision making by forcing subscribers to internalize the full social costs (i.e., excess congestion) imposed on all subscribers to the network. There is an additional problem of settlements, or determining how usage and, potentially, access revenues should be distributed among the multiple carriers. If monopoly rents are collected by any of the carriers, the settlements mechanism would provide a vehicle for distributing those rents. In the absence of centralized coordination, the networks need to share congestion pricing information so that the originating networks can know what price to set for end-to-end service. Even in a world where firms do not have market power, revenue transfers among service providers (i.e., settlements) are likely to be necessary.
