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Mobile Network Competition, Customer Ignorance and Fixed-to-Mobile Call Prices

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Author Info
Gans, J.S.
King, S.P.

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Abstract

This paper examines the influence of mobile network competition on the prices of fixed-to-mobile calls. Because fixed line customers cannot, in general, distinguish the identity of a specific mobile network, these networks have market power when setting termination charges for calls from fixed lines. We show that: (1) unregulated mobile termination charges will result in higher than monopoly call prices; (2) the regulation of termination charges and prices downward will affect mobile subscription rates and may lower these rates; and (3) regulation of any mobile carrier's termination charges can reduce fixed to mobile prices but will result in an increase in unregulated carriers' termination charges. When fixed line consumers can distinguish between the different mobile networks they are calling, fixed to mobile call prices will fall relative to their level under customer ignorance. Direct mobile charging for termination also exerts downward pressure on the total fixed to mobile call price. A low cost method of lowering fixed to mobile charges would be to facilitate the identification of carriers by consumers and to restructure billing so that mobile networks are able to directly charge fixed line consumers for termination services.

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Publisher Info
Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 734.

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Length: 31 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:mlb:wpaper:734

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Related research
Keywords: TELECOMMUNICATIONS ; PRICES ; REGULATION;

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Find related papers by JEL classification:
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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  1. Pio Baake & Kay Mitusch, 2005. "Mobile Phone Termination Charges with Asymmetric Regulation," Discussion Papers of DIW Berlin 500, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  2. Joan Calzada & Francesc Trillas, 2005. "The interconnection prices in telecomunications: from theory to practice," Hacienda Pública Española, IEF, vol. 173(2), pages 85-125, June. [Downloadable!]
  3. Yu-Shan Lo, . "Market Shares, Consumer Ignorance and the Reciprocal Termination Charges," Discussion Papers 09/19, Department of Economics, University of York. [Downloadable!]
  4. Hurkens, Sjaak & Jeon, Doh-Shin, 2009. "Mobile Termination and Mobile Penetration," IDEI Working Papers 575, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  5. Sean Lyons, 2006. "Measuring the Benefits of Mobile Number Portability," Trinity Economics Papers tep2009, Trinity College Dublin, Department of Economics. [Downloadable!]
  6. Ralf Dewenter & Justus Haucap, 2005. "The Effects of Regulating Mobile Termination Rates for Asymmetric Networks," European Journal of Law and Economics, Springer, vol. 20(2), pages 185-197, September. [Downloadable!] (restricted)
  7. Doh-Shin Jeon & Sjaak Hurkens, 2007. "A Retail Benchmarking Approach to Efficient Two-way Access Pricing: Two-Part Tariffs," Working Papers 07-11, NET Institute, revised Sep 2007. [Downloadable!]
  8. Sjaak Hurkens & Doh-Shin Jeon, 2009. "Mobile Termination and Mobile Penetration," UFAE and IAE Working Papers 777.09, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
    Other versions:
  9. Harbord, David & Pagnozzi, Marco, 2008. "On-Net/Off-Net Price Discrimination and 'Bill-and-Keep' vs. 'Cost-Based' Regulation of Mobile Termination Rates," MPRA Paper 14540, University Library of Munich, Germany. [Downloadable!]
  10. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany. [Downloadable!]
  11. Armstrong, Mark & Wright, Julian, 2008. "Mobile Call Termination," MPRA Paper 2344, University Library of Munich, Germany. [Downloadable!]
    Other versions:
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