The revenue-sharing rule for interconnection charges

In this paper we explore the economic principle behind the revenue-sharing rule for interconnection charges. Our main finding is that symmetric firms can collude by splitting the revenues equally. We further characterize the optimal revenue-sharing ratio and discuss the relationship between optimal ratio and the optimal access price. We also show that the revenue-sharing rule can have the perverse effect of inducing a firm to raise its own costs in order to gain a higher share of revenues.