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On-Net and Off-Net Pricing on Asymmetric Telecommunications Networks

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  • Hoernig, Steffen

Abstract

The differential between on-net and off-net prices, for example on mobile telephony networks, is an issue that is hotly debated between telecoms operators and regulators. Small operators contend that their competitors' high off-net prices are anticompetitive. We show that if the utility of receiving calls is taken into account, the equilibrium pricing structures will indeed depend on firms' market shares. Larger firms will charge higher off-net prices even without anticompetitive intent, both under linear and two-part tariffs. Predative behavior would be accompanied by even larger on-net / off-net differentials even if access charges are set at cost.

Suggested Citation

  • Hoernig, Steffen, 2006. "On-Net and Off-Net Pricing on Asymmetric Telecommunications Networks," CEPR Discussion Papers 5588, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:5588
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    asymmetry; call externality; on/off-net pricing; telecommunications network competition;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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