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Network Asymmetries and Access Pricing in Cellular Telecommunications

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  • Viktoria Kocsis

    ()
    (Corvinus University of Budapest and Tinbergen Institute (Amsterdam))

Abstract

Network shares and retail prices are not symmetric in the telecommunications market with multiple bottlenecks which give rise to new questions of access fee regulation. In this paper we consider a model with two types of asymmetry arising from different entry timing, i.e. a larger reputation for the incumbent and lower cost of servicing for the entrant as a result of more advanced technology. As a result firms have divergent preferences over the access fee. In case of linear and non-linear prices the access fee might still act as the instrument of collusion, but only if a side-payment is permitted which is generally welfare decreasing. Moreover, in contrast with the European regulatory framework, the access fee on the basis of termination cost might not necessarily be a socially preferable solution.

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Bibliographic Info

Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0513.

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Length: 32 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:has:discpr:0513

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Keywords: cost asymmetry; brand loyalty; imperfect competition; network interconnection; access fee;

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  1. de Bijl,Paul & Peitz,Martin, 2003. "Regulation and Entry into Telecommunications Markets," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521808378.
  2. Gruber, Harald & Verboven, Frank, 1999. "The Diffusion of Mobile Telecommunications Services in the European Union," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2054, C.E.P.R. Discussion Papers.
  3. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 108(448), pages 545-64, May.
  4. de Bijl, Paul W. J. & Peitz, Martin, 2004. "Dynamic regulation and entry in telecommunications markets: a policy framework," Information Economics and Policy, Elsevier, Elsevier, vol. 16(3), pages 411-437, September.
  5. Peitz, Martin, 2005. "Asymmetric access price regulation in telecommunications markets," European Economic Review, Elsevier, Elsevier, vol. 49(2), pages 341-358, February.
  6. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
  7. Jong-Hee Hahn, 2000. "Network Competition and Interconnection with Heterogeneous Subscribers," Keele Department of Economics Discussion Papers (1995-2001), Department of Economics, Keele University 2000/11, Department of Economics, Keele University.
  8. Dessein, Wouter, 2004. "Network competition with heterogeneous customers and calling patterns," Information Economics and Policy, Elsevier, Elsevier, vol. 16(3), pages 323-345, September.
  9. Gruber, Harald, 2001. "Competition and innovation: The diffusion of mobile telecommunications in Central and Eastern Europe," Information Economics and Policy, Elsevier, Elsevier, vol. 13(1), pages 19-34, March.
  10. Michael Carter & Julian Wright, 2003. "Asymmetric Network Interconnection," Review of Industrial Organization, Springer, Springer, vol. 22(1), pages 27-46, February.
  11. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, Springer, vol. 14(1), pages 1-25, February.
  12. 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.
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