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Access price structure and entrant build-or-buy incentives in mobile markets

Author

Listed:
  • Malin Arve

    (NHH Norwegian School of Economics)

  • Øystein Foros

    (NHH Norwegian School of Economics)

  • Hans Jarle Kind

    (NHH Norwegian School of Economics)

Abstract

We consider a market structure with three mobile providers, two of which are vertically integrated with nationwide coverage. The third provider (an entrant) invests in partial coverage and needs to rent access from one of its rivals. Competition between the vertically integrated providers in the access market may drive them to offer an access price structure that benefits the entrant. For a given level of the access price, the entrant benefits from an access price structure that reduces its need to invest. If asymmetric regulation is imposed whereby only one of the vertically integrated firms (the incumbent) face restrictions on which access price structure it can offer, the access price could be higher than in an unregulated economy. This provides a cautionary tale for competition authorities as well as sector-specific regulators, both of which typically only impose restrictions on the incumbent. The paper is motivated by the Norwegian mobile market, where the competition authorities imposed a fine of 78 million euros on Telenor (the dominant incumbent) for allegations of the abuse of market power by changing the access price structure and thereby hampering an entrant’s investment incentives.

Suggested Citation

  • Malin Arve & Øystein Foros & Hans Jarle Kind, 2022. "Access price structure and entrant build-or-buy incentives in mobile markets," Journal of Regulatory Economics, Springer, vol. 61(1), pages 67-87, February.
    • Handle: RePEc:kap:regeco:v:61:y:2022:i:1:d:10.1007_s11149-021-09442-3
    DOI: 10.1007/s11149-021-09442-3
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