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The Nature and Magnitude of the Effects of Asymmetric Regulation of Mobile Termination Rates on the Mexican Retail Prices

Author

Listed:
  • Robles-Rovalo, Arturo
  • Díaz-Goti, Emiliano
  • Guarneros-Gutiérrez, Rodrigo

Abstract

In theory, network profits are independent of the reciprocal termination rates when operators charge nondiscriminatory call prices (Laffont, Rey and Tirole, 1998). Additionally, termination rates can be used to subsidize subscriber acquisition cost. This issue is typically known as a "waterbed effect", where a reduction (increase) in termination rates leads to corresponding increase (reduction) in subscription fees to consumers. We are using a practical case for testing the effects in the final prices for regulatory policy with several changes in mobile termination rates based on an asymmetric price access regulation. In our example, the termination rates have been part of a vertical restriction strategy. The observed network-base price discrimination implemented by the major network (Telcel) resulted in deadweight efficiencies lost and created barriers to new entrance and blocked growth for the small networks OECD (2012). Historically, profits margins and mobile prices comes down whenever regulator have reduced termination rates; following the income effects in subscription (Tangeras, 2014). Having in mind this fact, regulators would diminish termination rates in order to pushdown mobile prices and stimulate competition, rest on a cost-based asymmetric price regulation. The further research allows a statistical assessment of the asymmetric price regulation implemented by the Mexican regulatory authority during January 2013 to June 2017. This paper evaluates if asymmetric regulation brings a better impact in the Mexican consumer welfare, driving the retail prices of mobile services down, also the effectivity of this policy for the next years, taking in to account that there is not significant change in the market share among all mobile networks.

Suggested Citation

  • Robles-Rovalo, Arturo & Díaz-Goti, Emiliano & Guarneros-Gutiérrez, Rodrigo, 2018. "The Nature and Magnitude of the Effects of Asymmetric Regulation of Mobile Termination Rates on the Mexican Retail Prices," 22nd ITS Biennial Conference, Seoul 2018. Beyond the boundaries: Challenges for business, policy and society 190426, International Telecommunications Society (ITS).
    • Handle: RePEc:zbw:itsb18:190426
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    References listed on IDEAS

    as
    1. Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, vol. 119(538), pages 270-307, June.
    2. Thomas P. Tangerås, 2014. "Network competition with income effects," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 645-673, September.
    3. Hans Melberg & Karl Lund, 2012. "Do smoke-free laws affect revenues in pubs and restaurants?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 13(1), pages 93-99, February.
    4. 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.
    5. Edmond Baranes & Cuong Vuong, 2012. "Competition with asymmetric regulation of mobile termination charges," Journal of Regulatory Economics, Springer, vol. 42(2), pages 204-222, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Mexico; Mobile Telecommunications; Termination Rates; Structural Change; Asymmetric Regulation; Convergence; Time Series Analysis;
    All these keywords.

    JEL classification:

    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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