ble. Consumer demand for Internet access services depends on the types of content that are available online. Generally, communications networks are not vertically integrated with providers of complementary services. The relationship between the transmission services of a communications net- work and the services obtained through the network is analogous to other types of complements. The classic example is computer hardware and software. A consumer Pricing Network Services D(p,a+g) Figure 3.20. The demand for network services when the cost of a complementary service is purchases hardware in anticipation of using various types of software. The hard- ware often has little value without the applications, which depend on software. This includes such functions as word processing, spreadsheets, data storage, multimedia display, and Web browsers. The greater the potential availability of software, the greater the consumer's willingness to pay for hardware. To highlight the effects of complements on demand for network services, we examine a simple model of demand. Suppose that there is a single representa- tive consumer who purchases both network services and a set of complementary services. Let Q represent the amount of network services. Suppose that the con- sumer purchases complementary services in the amount of one unit each, and let M represent the number of complementary services. Let P be the price of network services and be gbe the price of a complementary service, all of which have the same price. The consumer has utility U(Q, M) from the consumption of network services and complementary services. The consumer can vary the relative proportions of network transmission services and complementary services that are consumed. The availability of network services is represented by a cost parameter, a. The parameter represents the per-unit cost of access to the complementary service 25 This type of standard complementarity is referred to as an indirect network effect by Katz and Shapiro (1985). They argue that consumer