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On-net and off-net pricing on asymmetric telecommunications networks

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  • Hoernig, Steffen

Abstract

The differential between on-net and off-net prices, for example on mobile telephony networks, is an issue that is hotly debated between telecoms operators and regulators. Small operators contend that their competitors' high off-net prices are anticompetitive. We show that if the utility of receiving calls is taken into account, the equilibrium pricing structures will indeed depend on firms' market shares. Larger firms will charge higher off-net prices even without anticompetitive intent, both under linear and two-part tariffs. Predative behavior would be accompanied by even larger on-net / off-net differentials even if access charges are set at cost.

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Bibliographic Info

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

Volume (Year): 19 (2007)
Issue (Month): 2 (June)
Pages: 171-188

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Handle: RePEc:eee:iepoli:v:19:y:2007:i:2:p:171-188

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

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References

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  1. Steinar Vagstad & Tommy Staahl Gabrielsen, 2004. "Why is on-net traffic cheaper than off-net traffic? Access markup as a collusive device and a barrier to entry," Econometric Society 2004 Australasian Meetings 37, Econometric Society.
  2. repec:eee:ecolet:v:71:y:2001:i:3:p:413-42 is not listed on IDEAS
  3. Hoernig, Steffen, 2007. "On-net and off-net pricing on asymmetric telecommunications networks," Information Economics and Policy, Elsevier, vol. 19(2), pages 171-188, June.
  4. Berger, Ulrich, 2005. "Bill-and-keep vs. cost-based access pricing revisited," Economics Letters, Elsevier, vol. 86(1), pages 107-112, January.
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  9. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
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  13. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, vol. 14(1), pages 1-25, February.
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  15. Ulrich Berger, 2004. "Access Charges in the Presence of Call Externalities," Industrial Organization 0408009, EconWPA, revised 31 Aug 2004.
  16. Gans, Joshua S. & King, Stephen P., 2001. "Using 'bill and keep' interconnect arrangements to soften network competition," Economics Letters, Elsevier, vol. 71(3), pages 413-420, June.
  17. 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.
  18. Berger Ulrich, 2005. "Access Charges in the Presence of Call Externalities," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-18, January.
  19. Ralf Dewenter & Justus Haucap, 2005. "The Effects of Regulating Mobile Termination Rates for Asymmetric Networks," European Journal of Law and Economics, Springer, vol. 20(2), pages 185-197, September.
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