Seesaw in the air: Interconnection regulation and the structure of mobile tariffs
AbstractInterconnection rates are a key variable in telecommunications markets. Every call that is placed must be terminated by the network of the receiving party, thus the termination end has the characteristic of an economic bottleneck and is subject to regulation in many countries. This paper examines the impact of regulatory intervention to cut termination rates of calls to mobile phones. We argue that regulatory cuts should have a differential impact according to the type of tariff the mobile customer subscribes to. While all mobile customers may pay higher prices because of a "waterbed" effect, termination rates also affect competition among mobile operators. We show that the waterbed effect is diluted, but not eliminated, for customers with pre-paid cards, where regulation also acts as impediment to "raise-each-other's-cost" collusive strategies that mobile networks can adopt. The waterbed effect is instead strongest for consumers with post-paid subscription contracts.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Information Economics and Policy.
Volume (Year): 23 (2011)
Issue (Month): 2 (June)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505549
Mobile telephony Termination rates Two-way access charges Regulation;
Other versions of this item:
- Christos Genakos & Tommaso Valletti, 2011. "Seesaw in the Air: Interconnection Regulation and the Structure of Mobile Tariffs," CEP Discussion Papers dp1045, Centre for Economic Performance, LSE.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wright, Julian, 2002. "Access Pricing under Competition: An Application to Cellular Networks," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 289-315, September.
- Vogelsang, Ingo, 2010. "The relationship between mobile and fixed-line communications: A survey," Information Economics and Policy, Elsevier, vol. 22(1), pages 4-17, March.
- Christos Genakos & Tommaso Valletti, 2008.
"Testing the “Waterbed” Effect in Mobile Telephony,"
CEIS Research Paper
110, Tor Vergata University, CEIS, revised 11 Jul 2008.
- Christos Genakos & Tommaso Valletti, 2007. "Testing the "Waterbed" Effect in Mobile Telephony," CEP Discussion Papers dp0827, Centre for Economic Performance, LSE.
- Genakos, Christos D. & Valletti, Tommaso, 2009. "Testing the "Waterbed" Effect in Mobile Telephony," CEPR Discussion Papers 7611, C.E.P.R. Discussion Papers.
- K. Andersson & � Foros & F. Steen, 2009.
"Text and voice: complements, substitutes or both?,"
Industrial and Corporate Change,
Oxford University Press, vol. 18(6), pages 1231-1247, December.
- Dewenter, Ralf & Kruse, Jörn, 2011.
"Calling party pays or receiving party pays? The diffusion of mobile telephony with endogenous regulation,"
Information Economics and Policy,
Elsevier, vol. 23(1), pages 107-117, March.
- Dewenter, Ralf & Kruse, Jörn, 2010. "Calling party pays or receiving party pays? The diffusion of mobile telephony with endogenous regulation," DICE Discussion Papers 10, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- Armstrong, M., 1996. "Network interconnection," Discussion Paper Series In Economics And Econometrics 9625, Economics Division, School of Social Sciences, University of Southampton.
- Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
- Harbord, David & Hoernig, Steffen, 2010.
"Welfare Analysis of Regulating Mobile Termination Rates in the UK (with an Application to the Orange/T-Mobile Merger),"
CEPR Discussion Papers
7730, C.E.P.R. Discussion Papers.
- David Harbord & Steffen Hoernig, 2012. "Welfare Analysis of Regulating Mobile Termination Rates in the UK with an Application to the Orange/T-Mobile Merger," FEUNL Working Paper Series wp571, Universidade Nova de Lisboa, Faculdade de Economia.
- Harbord, David & Hoernig, Steffen, 2010. "Welfare Analysis of Regulating Mobile Termination Rates in the UK (with an Application to the Orange/T-Mobile Merger)," MPRA Paper 21515, University Library of Munich, Germany.
- Hoernig, Steffen, 2010. "Competition Between Multiple Asymmetric Networks: Theory and Applications," CEPR Discussion Papers 8060, C.E.P.R. Discussion Papers.
- Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
- Harbord David & Pagnozzi Marco, 2010. "Network-Based Price Discrimination and `Bill-and-Keep' vs. `Cost-Based' Regulation of Mobile Termination Rates," Review of Network Economics, De Gruyter, vol. 9(1), pages 1-46, February.
- Audrey Laporte & Frank Windmeijer, 2005.
"Estimation of Panel Data Models with Binary Indicators when Treatment Effects are not Constant over Time,"
laporte-04-01, University of Toronto, Department of Economics.
- Laporte, Audrey & Windmeijer, Frank, 2005. "Estimation of panel data models with binary indicators when treatment effects are not constant over time," Economics Letters, Elsevier, vol. 88(3), pages 389-396, September.
- Gans, J.S. & King, S.P., 2000.
"Mobile Network Competition, Customer Ignorance and Fixed-to-Mobile Call Prices,"
Department of Economics - Working Papers Series
734, The University of Melbourne.
- Gans, Joshua S. & King, Stephen P., 2000. "Mobile network competition, customer ignorance and fixed-to-mobile call prices," Information Economics and Policy, Elsevier, vol. 12(4), pages 301-327, December.
- Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, vol. 119(538), pages F270-F307, 06.
- Tommaso Valletti & George Houpis, 2005. "Mobile Termination: What is the “Right” Charge?," Journal of Regulatory Economics, Springer, vol. 28(3), pages 235-258, November.
- Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring.
- Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
- Ginger Zhe Jin & Marc Rysman, 2012. "Platform Pricing at Sports Card Conventions," NBER Working Papers 17959, National Bureau of Economic Research, Inc.
- Cunningham, Brendan M. & Alexander, Peter J. & Candeub, Adam, 2010. "Network growth: Theory and evidence from the mobile telephone industry," Information Economics and Policy, Elsevier, vol. 22(1), pages 91-102, March.
- Andersson, Kjetil & Foros, Øystein & Hansen, Bjørn, 2012. "Empirical evidence on the relationship between mobile termination rates and firms’ profit," Discussion Papers 2012/10, Department of Business and Management Science, Norwegian School of Economics.
- Lee, Jongyong & Lee, Duk Hee, 2012. "Asymmetry of mobile termination rates and the waterbed effect," 23rd European Regional ITS Conference, Vienna 2012 60353, International Telecommunications Society (ITS).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.