Information Economics and Policy 11 (1999) 1–22 Light-handed regulation of access in Australia: negotiation with arbitration a, b * Stephen P. King , Rodney Maddock a Department of Economics, The University of Melbourne, Parkville, Vic. 3052, Australia b Department of Economics, La Trobe University, Bundoora, Vic., Australia Received 1 July 1998; accepted 23 October 1998 Abstract Interconnection based on commercial negotiation subject to arbitration forms part of US and Australian telecommunications legislation. General infrastructure access in Australia is also governed by ‘light-handed’ regulation based on bargaining. This paper considers the potential outcomes of access regulations based on negotiation. Using an infinite period bargaining game with an outside regulatory option, we show that a range of potential equilibria can be supported by negotiation. Access seekers and access providers may fail to seize monopoly profits in equilibrium. The regulator can substantially influence the range of bargaining outcomes through both the expected outcome of arbitration and its interpretation of regulatory procedures. We consider alternative regulatory approaches consistent with the Australian legislation. The model presented in this paper uses the Australian regime as a template, but provides insight into the broader issue of ‘light-handed’ access regulation.  1999 Elsevier Science B.V. All rights reserved. Keywords: Access; bargaining; regulation; public utilities; telecommunications JEL Classification: D43; L13; L42; L96 1. Introduction Access is a key element in infrastructure reform. Competition in telephone services, electricity and gas retailing, water and sewerage services and rail * Corresponding author. Tel.: 1 61-3-93447029; fax: 161-3-93446899. E-mail address: s.king@ecomfac.unimelb.edu.au (S.P. King) 0167-6245 / 99 / $ – see front matter  1999 Elsevier Science B.V. All rights reserved. PII: S0167-6245(98)00019-5