Mobile network interconnection and investments
AbstractAbstract In markets with competing interconnected networks like mobile telecommunication markets investments affect the investor’s and also any competitors’ profits. In a theoretical model it is shown that cost-reducing investments reduce the investor’s termination rates and increase competitors’ termination rates under the callingparty- network-pays regime. Moreover, investments increase off-net traffic from the investor’s network but also from competitors’ networks. Regulation changes the effect on competitors’ termination rates but all other effects remain the same or are strengthened. Empirical results support the theoretical findings concerning the investor’s termination rates and the findings on off-net traffic. Competitors’ termination rates decrease. The negative termination rate effect even outweighs the quantity effect in the competitors’ profit functions. Testing for a common regulation-investment effect provides evidence that the negative investment externality is not due to regulation. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 09-071.
Date of creation: 2009
Date of revision:
regulation; mobile telecommunications; investments; interconnection;
Find related papers by JEL classification:
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
- L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-19 (All new papers)
- NEP-COM-2009-12-19 (Industrial Competition)
- NEP-NET-2009-12-19 (Network Economics)
- NEP-REG-2009-12-19 (Regulation)
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