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Mobile network competition, customer ignorance and fixed-to-mobile call prices

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  • Gans, Joshua S.
  • King, Stephen P.

Abstract

This paper examines the influence of mobile network competition on the prices of fixed-to-mobile calls. Because fixed line customers cannot, in general, distinguish the identity of a specific mobile network, these networks have market power when setting termination charges for calls from fixed lines. We show that: (1) unregulated mobile termination charges will result in higher than monopoly call prices; (2) the regulation of termination charges and prices downward will affect mobile subscription rates and may lower these rates; and (3) regulation of any mobile carrier's termination charges can reduce fixed to mobile prices but will result in an increase in unregulated carriers' termination charges. When fixed line consumers can distinguish between the different mobile networks they are calling, fixed to mobile call prices will fall relative to their level under customer ignorance. Direct mobile charging for termination also exerts downward pressure on the total fixed to mobile call price. A low cost method of lowering fixed to mobile charges would be to facilitate the identification of carriers by consumers and to restructure billing so that mobile networks are able to directly charge fixed line consumers for termination services.

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Bibliographic Info

Article provided by Elsevier in its journal Information Economics and Policy.

Volume (Year): 12 (2000)
Issue (Month): 4 (December)
Pages: 301-327

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Handle: RePEc:eee:iepoli:v:12:y:2000:i:4:p:301-327

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Web page: http://www.elsevier.com/locate/inca/505549

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  1. Baron, David P & Myerson, Roger B, 1982. "Regulating a Monopolist with Unknown Costs," Econometrica, Econometric Society, vol. 50(4), pages 911-30, July.
  2. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: II. Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 38-56, Spring.
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  7. Armstrong, M. & Doyle, C. & Vickers, J., 1995. "The access pricing problem: a synthesis," Discussion Paper Series In Economics And Econometrics 9532, Economics Division, School of Social Sciences, University of Southampton.
  8. Baron, David P., 1989. "Design of regulatory mechanisms and institutions," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 24, pages 1347-1447 Elsevier.
  9. Doyle, Chris & Smith, Jennifer C., 1998. "Market structure in mobile telecoms: qualified indirect access and the receiver pays principle," Information Economics and Policy, Elsevier, vol. 10(4), pages 471-488, December.
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