Mobile Termination and Mobile Penetration
AbstractIn this paper, we study how access pricing affects network competition when subscription demand is elastic and each network uses non-linear prices and can apply termination-based price discrimination. In the case of a fixed per minute termination charge, we find that a reduction of the termination charge below cost has two opposing effects: it softens competition but helps to internalize network externalities. The former reduces mobile penetration while the latter boosts it. We find that firms always prefer termination charge below cost for either motive while the regulator prefers termination below cost only when this boosts penetration. Next, we consider the retail benchmarking approach (Jeon and Hurkens, 2008) that determines termination charges as a function of retail prices and show that this approach allows the regulator to increase penetration without distorting call volumes.
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.
Bibliographic InfoPaper provided by Barcelona Graduate School of Economics in its series Working Papers with number 393.
Date of creation: Jul 2009
Date of revision:
Mobile Penetration; Termination Charge; Access Pricing; Networks; Interconnection; Regulation; Telecommunications;
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
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.:
- Valletti, Tommaso M & Cave, Martin, 1998. "Competition in UK mobile communications," Telecommunications Policy, Elsevier, vol. 22(2), pages 109-131, March.
- Jullien, Bruno & Rey, Patrick & Sand-Zantman, Wilfried, 2013.
"Termination fees revisited,"
International Journal of Industrial Organization,
Elsevier, vol. 31(6), pages 738-750.
- Doh-Shin Jeon & Sjaak Hurkens, 2007.
"A Retail Benchmarking Approach to Eficient Two-Way Access Pricing,"
UFAE and IAE Working Papers
717.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Doh-Shin Jeon & Sjaak Hurkens, 2007. "A retail benchmarking approach to efficient two-way access pricing," Economics Working Papers 1055, Department of Economics and Business, Universitat Pompeu Fabra.
- Cambini, Carlo & Valletti, Tommaso, 2003.
"Investments and Network Competition,"
CEPR Discussion Papers
3829, C.E.P.R. Discussion Papers.
- 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.
- Laffont, Jean-Jacques & Marcus, Scott & Rey, Patrick & Tirole, Jean, 2001.
"Internet Interconnection and the Off-Net-Cost Pricing Principle,"
IDEI Working Papers
130, Institut d'Économie Industrielle (IDEI), Toulouse.
- Laffont, Jean-Jacques & Marcus, Scott & Rey, Patrick Author Name: Tirole, Jean, 2003. " Internet Interconnection and the Off-Net-Cost Pricing Principle," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 370-90, Summer.
- Jean-Jacques Laffont, 2001. "Internet Interconnection and the Off-Net-Cost Pricing Principle," Theory workshop papers 357966000000000085, UCLA Department of Economics.
- Dessein, Wouter, 2003.
" Network Competition in Nonlinear Pricing,"
RAND Journal of Economics,
The RAND Corporation, vol. 34(4), pages 593-611, Winter.
- de Bijl,Paul & Peitz,Martin, 2003.
"Regulation and Entry into Telecommunications Markets,"
Cambridge University Press, number 9780521808378, December.
- de Bijl,Paul & Peitz,Martin, 2008. "Regulation and Entry into Telecommunications Markets," Cambridge Books, Cambridge University Press, number 9780521066631, December.
- Hurkens, Sjaak & Jeon, Doh-Shin, 2012. "Promoting network competition by regulating termination charges," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 541-552.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruno Guallar).
If references are entirely missing, you can add them using this form.