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Network Asymmetries and Access Pricing in Cellular Telecommunications

  • Viktoria Kocsis


    (Corvinus University of Budapest and Tinbergen Institute (Amsterdam))

Network shares and retail prices are not symmetric in the telecommunications market with multiple bottlenecks which give rise to new questions of access fee regulation. In this paper we consider a model with two types of asymmetry arising from different entry timing, i.e. a larger reputation for the incumbent and lower cost of servicing for the entrant as a result of more advanced technology. As a result firms have divergent preferences over the access fee. In case of linear and non-linear prices the access fee might still act as the instrument of collusion, but only if a side-payment is permitted which is generally welfare decreasing. Moreover, in contrast with the European regulatory framework, the access fee on the basis of termination cost might not necessarily be a socially preferable solution.

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Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0513.

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Length: 32 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:has:discpr:0513
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  1. Gruber, H. & Verboven, F.L., 1998. "The Diffusion of Mobile Telecommunications Services in the European Union," Discussion Paper 1998-138, Tilburg University, Center for Economic Research.
  2. Michael Carter & Julian Wright, 2003. "Asymmetric Network Interconnection," Review of Industrial Organization, Springer, vol. 22(1), pages 27-46, February.
  3. Dessein, Wouter, 2004. "Network competition with heterogeneous customers and calling patterns," Information Economics and Policy, Elsevier, vol. 16(3), pages 323-345, September.
  4. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, vol. 14(1), pages 1-25, February.
  5. de Bijl, P.W.J. & Peitz, M., 2004. "Dynamic Regulation and Entry in Telecommunications Markets : A Policy Framework," Discussion Paper 2004-010, Tilburg University, Tilburg Law and Economic Center.
  6. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
  7. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: II. Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 38-56, Spring.
  8. Hahn, Jong-Hee, 2004. "Network competition and interconnection with heterogeneous subscribers," International Journal of Industrial Organization, Elsevier, vol. 22(5), pages 611-631, May.
  9. Peitz, Martin, 2005. "Asymmetric access price regulation in telecommunications markets," European Economic Review, Elsevier, vol. 49(2), pages 341-358, February.
  10. Gruber, Harald, 2001. "Competition and innovation: The diffusion of mobile telecommunications in Central and Eastern Europe," Information Economics and Policy, Elsevier, vol. 13(1), pages 19-34, March.
  11. Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
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