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Access regulation with asymmetric termination costs

  • Stühmeier, Torben

In many telecommunications markets incumbent providers enjoy a demand-side advantage over any entrant. However, market entrants may enjoy a supply-side advantage over the incumbent, since they are more efficient or operate on innovative technologies. Considering both a supply-side and a demand-side asymmetry, the present model analyzes the effect of two regulatory regimes: An access markup for a low cost network and reciprocal charges below the costs of a high cost network. Both regimes may have adverse effects on subscribers, market shares, and profits. It can be shown that an access markup is not generally beneficial and an access deficit not generally detrimental for the respective networks. However, if providers discriminate between on-net and off-net prices a markup on the entrant's termination cost is generally to its benefit and to the incumbent's detriment.

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Paper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 29.

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Date of creation: 2011
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Handle: RePEc:zbw:dicedp:29
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  1. Harbord, David & Hoernig, Steffen, 2010. "Welfare Analysis of Regulating Mobile Termination Rates in the UK (with an Application to the Orange/T-Mobile Merger)," MPRA Paper 21515, University Library of Munich, Germany.
  2. Peitz, Martin, 2005. "Asymmetric access price regulation in telecommunications markets," European Economic Review, Elsevier, vol. 49(2), pages 341-358, February.
  3. Paul Bijl & Martin Peitz, 2009. "Access regulation and the adoption of VoIP," Journal of Regulatory Economics, Springer, vol. 35(2), pages 111-134, April.
  4. Hoernig, Steffen, 2010. "Competition Between Multiple Asymmetric Networks: Theory and Applications," CEPR Discussion Papers 8060, C.E.P.R. Discussion Papers.
  5. Michael Carter & Julian Wright, 1999. "Interconnection in Network Industries," Review of Industrial Organization, Springer, vol. 14(1), pages 1-25, February.
  6. Gabrielsen, Tommy Staahl & Vagstad, Steinar, 2008. "Why is on-net traffic cheaper than off-net traffic Access markup as a collusive device," European Economic Review, Elsevier, vol. 52(1), pages 99-115, January.
  7. Cambini, Carlo & Valletti, Tommaso, 2003. "Investments and Network Competition," CEPR Discussion Papers 3829, C.E.P.R. Discussion Papers.
  8. repec:cup:cbooks:9780521066631 is not listed on IDEAS
  9. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring.
  10. Martin Peitz, 2005. "Asymmetric Regulation of Access and Price Discrimination in Telecommunications," Journal of Regulatory Economics, Springer, vol. 28(3), pages 327-343, November.
  11. Michael Carter & Julian Wright, 2003. "Asymmetric Network Interconnection," Review of Industrial Organization, Springer, vol. 22(1), pages 27-46, February.
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