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On-Net and Off-Net Pricing on Asymmetric Telecommunications Networks

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Hoernig, Steffen

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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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5588.

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Date of creation: Mar 2006
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Handle: RePEc:cpr:ceprdp:5588

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Keywords: asymmetry call externality on/off-net pricing telecommunications network competition

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L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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References listed on IDEAS
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.:
  1. 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. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
    Other versions:
  3. Ulrich Berger, 2005. "Access Charges in the Presence of Call Externalities," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 3(1), pages 1334-1334. [Downloadable!] (restricted)
  4. Cambini, Carlo & Valletti, Tommaso M., 2004. "Access charges and quality choice in competing networks," Information Economics and Policy, Elsevier, vol. 16(3), pages 391-409, September. [Downloadable!] (restricted)
  5. Ulrich Berger, 2004. "Access Charges in the Presence of Call Externalities," Industrial Organization 0408009, EconWPA, revised 31 Aug 2004. [Downloadable!]
  6. 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.
  7. Doh Shin Jeon & Jean Jacques Laffont & Jean Tirole, 2001. "On the Receiver Pays Principle," Economics Working Papers 561, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  8. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, vol. 14(1), pages 1-25, February. [Downloadable!] (restricted)
  9. Martin Peitz, 2005. "Asymmetric Regulation of Access and Price Discrimination in Telecommunications," Journal of Regulatory Economics, Springer, vol. 28(3), pages 327-343, November. [Downloadable!] (restricted)
  10. Kim, Jeong-Yoo & Lim, Yoonsung, 2001. "An economic analysis of the receiver pays principle," Information Economics and Policy, Elsevier, vol. 13(2), pages 231-260, June. [Downloadable!] (restricted)
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  11. Michael Carter & Julian Wright, 2003. "Asymmetric Network Interconnection," Review of Industrial Organization, Springer, vol. 22(1), pages 27-46, February. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Armstrong, Mark & Wright, Julian, 2008. "Mobile Call Termination," MPRA Paper 2344, University Library of Munich, Germany. [Downloadable!]
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