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Calling party pays or receiving party pays? The diffusion of mobile telephony with endogenous regulation

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  • Dewenter, Ralf
  • Kruse, Jörn

Abstract

This paper analyzes the impact on mobile telephony diffusion patterns of the two predominant payment regimes, calling party pays (CPP) and receiving party pays (RPP), for mobile termination services. By applying instrumental variable techniques to panel data we account for a possible interdependency of penetration rates and regulatory interventions. For this purpose we use data on political and institutional factors to instrument endogenous regulatory decisions. We conclude from our empirical analysis that there is no significant impact of either RPP or CPP on penetration rates. Therefore an application of RPP in order to obviate regulation of termination fees would be feasible.

Suggested Citation

  • Dewenter, Ralf & Kruse, Jörn, 2010. "Calling party pays or receiving party pays? The diffusion of mobile telephony with endogenous regulation," DICE Discussion Papers 10, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:10
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    Cited by:

    1. Sjaak Hurkens & Ángel Luis López, 2010. "Mobile Termination and Consumer Expectations under the Receiver-Pays Regime," Working Papers 10-12, NET Institute.
    2. Genakos, Christos & Valletti, Tommaso, 2011. "Seesaw in the air: Interconnection regulation and the structure of mobile tariffs," Information Economics and Policy, Elsevier, vol. 23(2), pages 159-170, June.
    3. Gu, Yiquan & Wenzel, Tobias, 2012. "Transparency, entry, and productivity," Economics Letters, Elsevier, vol. 115(1), pages 7-10.
    4. Hoernig, Steffen, 2016. "Going beyond duopoly: Connectivity breakdowns under receiving party pays," Information Economics and Policy, Elsevier, vol. 36(C), pages 1-9.
    5. Vogelsang Ingo, 2013. "The Endgame of Telecommunications Policy? A Survey," Review of Economics, De Gruyter, vol. 64(3), pages 193-270, December.
    6. Sjaak Hurkens & Angel L. Lopez, 2014. "Who Should Pay for Two-Way Interconnection?," Working Papers 774, Barcelona School of Economics.
    7. Kongaut, Chatchai & Bohlin, Erik, 2012. "Impacts of mobile termination rates (MTRs) on retail prices: The implication for regulators," 23rd European Regional ITS Conference, Vienna 2012 60348, International Telecommunications Society (ITS).
    8. Haucap, Justus & Herr, Annika & Frank, Björn, 2011. "In vino veritas: Theory and evidence on social drinking," DICE Discussion Papers 37, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    9. Clémence Christin, 2013. "Entry Deterrence Through Cooperative R&D Over-Investment," Recherches économiques de Louvain, De Boeck Université, vol. 79(2), pages 5-26.
    10. Stühmeier Torben & Wenzel Tobias, 2012. "Regulating Advertising in the Presence of Public Service Broadcasting," Review of Network Economics, De Gruyter, vol. 11(2), pages 1-23, June.
    11. ., 2014. "Restructuring among mobile service providers: a ten-year perspective," Chapters, in: Mobile Telecommunications Networks, chapter 1, pages 1-25, Edward Elgar Publishing.
    12. Tommaso Majer & Michele Pistollato, 2016. "Calling vs. Receiving Party Pays," Competition and Regulation in Network Industries, , vol. 17(2), pages 150-180, June.
    13. Hurkens, Sjaak & López, Ángel L., 2021. "Mobile termination rates and retail regimes in Europe and the US: A unified theory of CPP and RPP," Information Economics and Policy, Elsevier, vol. 56(C).
    14. Hoernig, Steffen, 2012. "The Breakdown of Connectivity Breakdowns," CEPR Discussion Papers 9189, C.E.P.R. Discussion Papers.
    15. Hawthorne, Ryan, 2016. "Do call termination rate interventions affect developing countries (with smaller fixed line networks) differently? Testing for the ‘waterbed effect' for non-linear tariffs in South Africa," 27th European Regional ITS Conference, Cambridge (UK) 2016 148673, International Telecommunications Society (ITS).
    16. Genakos, Christos & Valletti, Tommaso, 2012. "Regulating prices in two-sided markets: The waterbed experience in mobile telephony," Telecommunications Policy, Elsevier, vol. 36(5), pages 360-368.
    17. Barth, Anne-Kathrin & Heimeshoff, Ulrich, 2012. "Der angemessene Kostenmaßstab für Terminierungsentgelte - "Pure LRIC" vs. "KeL"," DICE Ordnungspolitische Perspektiven 29, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    18. Mansi Kedia, 2019. "Testing the waterbed effect for India’s telecom industry," Indian Economic Review, Springer, vol. 54(1), pages 121-148, June.

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    More about this item

    Keywords

    mobile telephony markets; calling-party-pays; mobile termination fees; endogenous regulation;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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