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On-Net/Off-Net Price Discrimination and 'Bill-and-Keep' vs. 'Cost-Based' Regulation of Mobile Termination Rates

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Author Info
Harbord, David
Pagnozzi, Marco

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Abstract

This paper surveys the recent literature on competition between mobile network operators in the presence of call externalities and network effects. It shows that the regulation of mobile termination rates based on “long-run incremental costs” increases networks’ strategic incentives to inefficiently set high on-net/off-net price differentials, thus harming smaller networks and new entrants. The paper argues in favor of a “bill-and-keep” system for mobile-to-mobile termination, and presents international evidence in support of this conclusion.

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File URL: http://mpra.ub.uni-muenchen.de/14540/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14540.

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Date of creation: Jan 2008
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Handle: RePEc:pra:mprapa:14540

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Related research
Keywords: mobile termination; network effects; call externalities; bill-and-keep;

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Find related papers by JEL classification:
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection

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  1. Patrick DeGraba, 2002. "Bill and Keep as the Efficient Interconnection Regime?: A Reply," Review of Network Economics, Concept Economics, vol. 1(1), pages 61-65, March. [Downloadable!]
  2. 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. [Downloadable!] (restricted)
    Other versions:
  3. Nakil Sung & Yong-Hun Lee, 2002. "Substitution between Mobile and Fixed Telephones in Korea," Review of Industrial Organization, Springer, vol. 20(4), pages 367-374, June. [Downloadable!] (restricted)
  4. Luís Cabral, 2007. "Dynamic Price Competition with Network Effects," Working Papers 22, Portuguese Competition Authority. [Downloadable!]
    Other versions:
  5. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring. [Downloadable!] (restricted)
  6. Tommaso M. Valletti & Carlo Cambini, 2005. "Investments and Network Competition," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 446-468, Summer.
    Other versions:
  7. Gruber, Harald & Verboven, Frank, 2001. "The diffusion of mobile telecommunications services in the European Union," European Economic Review, Elsevier, vol. 45(3), pages 577-588, March. [Downloadable!] (restricted)
    Other versions:
  8. Armstrong, M., 1996. "Network Interconnection," Discussion Paper Series In Economics And Econometrics 9625, Economics Division, School of Social Sciences, University of Southampton.
  9. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, vol. 14(1), pages 1-25, February. [Downloadable!] (restricted)
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  13. Cambini, Carlo & Valletti, Tommaso, 2005. "Information Exchange and Competition in Communications Networks," CEPR Discussion Papers 5031, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  14. Daniel Birke & G. Swann, 2006. "Network effects and the choice of mobile phone operator," Journal of Evolutionary Economics, Springer, vol. 16(1), pages 65-84, April. [Downloadable!] (restricted)
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    Other versions:
  16. 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)
  17. Cambini, Carlo & Valletti, Tommaso M., 2003. "Network competition with price discrimination: 'bill-and-keep' is not so bad after all," Economics Letters, Elsevier, vol. 81(2), pages 205-213, November. [Downloadable!] (restricted)
  18. Berger, Ulrich, 2005. "Bill-and-keep vs. cost-based access pricing revisited," Economics Letters, Elsevier, vol. 86(1), pages 107-112, January. [Downloadable!] (restricted)
  19. Ulrich Berger, 2004. "Access Charges in the Presence of Call Externalities," Industrial Organization 0408009, EconWPA, revised 31 Aug 2004. [Downloadable!]
  20. Julian Wright, 2002. "Bill and Keep as the Efficient Interconnection Regime?," Review of Network Economics, Concept Economics, vol. 1(1), pages 54-60, March. [Downloadable!]
  21. Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, vol. 119(538), pages F270-F307, 06. [Downloadable!] (restricted)
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  22. Dessein, Wouter, 2003. " Network Competition in Nonlinear Pricing," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 593-611, Winter.
  23. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany. [Downloadable!]
  24. Andersson, Kjetil & Foros, Øystein & Steen, Frode, 2006. "Text and Voice: Complements, Substitutes or Both?," CEPR Discussion Papers 5780, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  25. Ahn, Hyungtaik & Lee, Myeong-Ho, 1999. "An econometric analysis of the demand for access to mobile telephone networks," Information Economics and Policy, Elsevier, vol. 11(3), pages 297-305, September. [Downloadable!] (restricted)
  26. Patrick Degraba, 2003. "Efficient Intercarrier Compensation for Competing Networks When Customers Share the Value of A Call," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 12(2), pages 207-230, 06. [Downloadable!] (restricted)
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  28. Tommaso Valletti & George Houpis, 2005. "Mobile Termination: What is the “Right” Charge?," Journal of Regulatory Economics, Springer, vol. 28(3), pages 235-258, November. [Downloadable!] (restricted)
  29. Joan Calzada & TommasoM. Valletti, 2008. "Network Competition and Entry Deterrence," Economic Journal, Royal Economic Society, vol. 118(531), pages 1223-1244, 08. [Downloadable!] (restricted)
    Other versions:
  30. Hahn, Jong-Hee, 2003. "Nonlinear pricing of telecommunications with call and network externalities," International Journal of Industrial Organization, Elsevier, vol. 21(7), pages 949-967, September. [Downloadable!] (restricted)
    Other versions:
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