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Mobile termination: Market power, externalities and their policy implications

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  • Albon, Rob
  • York, Richard

Abstract

Without regulation, market power in mobile termination is likely to result in mobile termination rates (MTRs) in excess of costs and cross-subsidised prices for mobile subscription/handsets. Mobile network operators (MNOs) argue that subsidisation is efficient, being justified by, inter alia, a network externality on new mobile subscriptions. However, especially in mature markets, the argument here is that MNOs will tend to set MTRs inefficiently high and subscription prices will be driven inefficiently low. Regulation is necessary to prevent these inefficiencies. Further, other externalities have different implications--e.g., the mobile call-receipt externality suggests a subsidy to mobile termination. The conclusion is that on balance and in the absence of detailed empirical estimation of the size of a multitude of possible types of externality, it is likely to be efficient to set MTRs to cost in markets with high penetration.

Suggested Citation

  • Albon, Rob & York, Richard, 2006. "Mobile termination: Market power, externalities and their policy implications," Telecommunications Policy, Elsevier, vol. 30(7), pages 368-384, August.
    • Handle: RePEc:eee:telpol:v:30:y:2006:i:7:p:368-384
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Rob Albon, 2006. "Fixed-to-Mobile Substitution, Complementarity and Convergence," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 13(4), pages 309-322.
    2. Hahn, Robert & Evans, Lewis, 2010. "Regulating Dynamic Markets: Progress in Theory and Practice," Working Paper Series 4052, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    3. repec:vuw:vuwscr:19155 is not listed on IDEAS
    4. Casey, Thomas R. & Töyli, Juuso, 2012. "Mobile voice diffusion and service competition: A system dynamic analysis of regulatory policy," Telecommunications Policy, Elsevier, vol. 36(3), pages 162-174.
    5. Parsons, Steve G. & Duffy-Deno, Kevin T., 2021. "Are telecommunications regulators correct in their beliefs that network size affects origination/termination?," Telecommunications Policy, Elsevier, vol. 45(2).
    6. Basaran, Alparslan A. & Cetinkaya, Murat & Bagdadioglu, Necmiddin, 2014. "Operator choice in the mobile telecommunications market: Evidence from Turkish urban population," Telecommunications Policy, Elsevier, vol. 38(1), pages 1-13.
    7. Cricelli, Livio & Grimaldi, Michele & Levialdi Ghiron, Nathan, 2012. "The impact of regulating mobile termination rates and MNO–MVNO relationships on retail prices," Telecommunications Policy, Elsevier, vol. 36(1), pages 1-12.
    8. Baigorri, Carlos M. & Maldonado, Wilfredo F.L., 2014. "Optimal mobile termination rate: The Brazilian mobile market case," Telecommunications Policy, Elsevier, vol. 38(1), pages 86-95.
    9. Alfred Vanags, 2010. "Mobile Termination: How to Regulate or Perhaps Not to Regulate at All?," TeliaSonera Institute Discussion papers 8, Baltic International Centre for Economic Policy Studies (BICEPS);Stockholm School of Economics in Riga (SSE Riga).
    10. Francesca Di Pillo & Livio Cricelli & Massimo Gastaldi & Nathan Levialdi, 2010. "Asymmetry in mobile access charges: is it an effective regulatory measure?," Netnomics, Springer, vol. 11(3), pages 291-314, October.
    11. Rob Albon, 2012. "Beyond Traditional Regulatory Models: Emerging Governance for New Networks," Chapters, in: Gerald R. Faulhaber & Gary Madden & Jeffrey Petchey (ed.), Regulation and the Performance of Communication and Information Networks, chapter 2, Edward Elgar Publishing.
    12. Hahn, Robert & Evans, Lewis, 2010. "Regulating Dynamic Markets: Progress in Theory and Practice," Working Paper Series 19155, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.

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