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Mobile Termination: What is the “Right” Charge?

Author

Listed:
  • Tommaso Valletti

  • George Houpis

Abstract

The regulation of fixed-to-mobile (F2M) termination charges has become increasingly important in Europe, Australia, and New Zealand under the Calling Party Pays principle. In the absence of any regulation, mobile operators have an incentive to set F2M termination charges “too high”. We show that the setting of the optimal F2M termination charges depends on the significance of network externalities, the intensity of competition in the mobile sector, and the distribution of customer preferences. We also discuss the merits of possible remedies which are not very intrusive. Copyright Springer Science+Business Media, Inc. 2005

Suggested Citation

  • Tommaso Valletti & George Houpis, 2005. "Mobile Termination: What is the “Right” Charge?," Journal of Regulatory Economics, Springer, vol. 28(3), pages 235-258, November.
    • Handle: RePEc:kap:regeco:v:28:y:2005:i:3:p:235-258
    DOI: 10.1007/s11149-005-3955-1
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    References listed on IDEAS

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    1. Littlechild, S.C., 0. "Mobile termination charges: Calling Party Pays versus Receiving Party Pays," Telecommunications Policy, Elsevier, vol. 30(5-6), pages 242-277, June.
    2. Armstrong, Mark, 1997. "Mobile telephony in the UK," MPRA Paper 35405, University Library of Munich, Germany.
    3. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
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    Citations

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    Cited by:

    1. Dewenter, Ralf & Kruse, Jörn, 2011. "Calling party pays or receiving party pays? The diffusion of mobile telephony with endogenous regulation," Information Economics and Policy, Elsevier, vol. 23(1), pages 107-117, March.
    2. Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, vol. 119(538), pages 270-307, June.
    3. Armstrong, Mark & Wright, Julian, 2007. "Mobile call termination in the UK," MPRA Paper 2344, University Library of Munich, Germany.
    4. Steffen Hoernig & Marc Bourreau & Carlo Cambini, 2014. "Fixed-mobile integration," Journal of Regulatory Economics, Springer, vol. 45(1), pages 57-74, February.
    5. 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.
    6. Tommaso Valletti, 2009. "Mobile Call Termination: A Tale of Two-Sided Markets," Chapters, in: François Lévêque & Howard Shelanski (ed.), Antitrust and Regulation in the EU and US, chapter 7, Edward Elgar Publishing.
    7. Hoernig, Steffen & Bourreau, Marc & Cambini, Carlo, 2015. "Fixed-mobile substitution and termination rates," Telecommunications Policy, Elsevier, vol. 39(1), pages 65-76.
    8. Pio Baake & Kay Mitusch, 2009. "Mobile phone termination charges with asymmetric regulation," Journal of Economics, Springer, vol. 96(3), pages 241-261, April.
    9. Christos Genakos & Tommaso Valletti, 2010. "Mobile Regulation and the ‘Waterbed’ Effect," Chapters, in: Morten Falch & Jan Markendahl (ed.), Promoting New Telecom Infrastructures, chapter 16, Edward Elgar Publishing.
    10. Vogelsang Ingo, 2013. "The Endgame of Telecommunications Policy? A Survey," Review of Economics, De Gruyter, vol. 64(3), pages 193-270, December.
    11. Hongjai Rhee & Minsoo Park, 2011. "Fixed-to-mobile call substitution and telephony market definition in Korea," Journal of Regulatory Economics, Springer, vol. 40(2), pages 198-218, October.
    12. Marc Bourreau & Carlo Cambini & Steffen Hoernig, 2015. "Price distortion under fixed-mobile substitution," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(4), pages 441-454, December.
    13. Hurkens, Sjaak & López, Ángel L., 2014. "Who Should Pay for Two-way Interconnection?," IESE Research Papers D/1102, IESE Business School.
    14. David Harbord & Steffen Hoernig, 2015. "Welfare Analysis of Regulating Mobile Termination Rates in the U.K," Journal of Industrial Economics, Wiley Blackwell, vol. 63(4), pages 673-703, December.
    15. Kohlstedt, Alexander, 2006. "Neuere Theoriebeiträge zur Netzökonomie: Zweiseitige Märkte und On-net/Off-net-Tariffdifferenzierung," WIK Discussion Papers 278, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    16. 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.
    17. Yu-Shan Lo, "undated". "Market Shares, Consumer Ignorance and the Reciprocal Termination Charges," Discussion Papers 09/19, Department of Economics, University of York.
    18. Christos Genakos & Tommaso Valletti, 2011. "Testing The “Waterbed” Effect In Mobile Telephony," Journal of the European Economic Association, European Economic Association, vol. 9(6), pages 1114-1142, December.
    19. Jerry A. Hausman, 2012. "Two-sided Markets with Substitution: Mobile Termination Revisited," Chapters, in: Gerald R. Faulhaber & Gary Madden & Jeffrey Petchey (ed.), Regulation and the Performance of Communication and Information Networks, chapter 13, Edward Elgar Publishing.
    20. Hoernig, Steffen & Harbord, David, 2010. "Welfare Analysis of Regulating Mobile Termination Rates in the UK (with an Application to the Orange/T-Mobile Merger)," CEPR Discussion Papers 7730, Centre for Economic Policy Research.
    21. Baigorri, Carlos M. & Maldonado, Wilfredo F.L., 2014. "Optimal mobile termination rate: The Brazilian mobile market case," Telecommunications Policy, Elsevier, vol. 38(1), pages 86-95.
    22. Haenlein, Michael, 2013. "Social interactions in customer churn decisions: The impact of relationship directionality," International Journal of Research in Marketing, Elsevier, vol. 30(3), pages 236-248.
    23. Bouali, Safieddine, 2017. "Regulated termination rates and competition among Tunisian mobile network operators. Barriers, bias, and incentives," Telecommunications Policy, Elsevier, vol. 41(7), pages 573-586.
    24. Morten Falch & Jan Markendahl (ed.), 2010. "Promoting New Telecom Infrastructures," Books, Edward Elgar Publishing, number 14144.
    25. J. Scott MARCUS, 2008. "IP-based NGNs and Interconnection: The Debate in Europe," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(72), pages 17-32, 4th quart.

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    Keywords

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    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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