Mobile Termination and Mobile Penetration

Hurkens, Sjaak and Jeon, Doh-Shin (2009) Mobile Termination and Mobile Penetration. TSE Working Paper, n. 09-070

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Official URL: http://tse-fr.eu/pub/21961

Abstract

In this paper, we study how access pricing affects network competition when subscription demand is elastic and each network uses non-linear prices and can apply termination-based price discrimination. In the case of a fixed per minute termination charge, we find that a reduction of the termination charge below cost has two opposing effects: it softens competition but helps to internalize network externalities. The former reduces mobile penetration while the latter boosts it. We find that firms always prefer termination charge below cost for either motive while the regulator prefers termination below cost only when this boosts penetration. Next, we consider the retail benchmarking approach (Jeon and Hurkens, 2008) that determines termination charges as a function of retail prices and show that this approach allows the regulator to increase penetration without distorting call volumes.

Item Type: Monograph (Working Paper)
Language: English
Date: 28 July 2009
JEL codes: D4 - Market Structure and Pricing
L96 - Telecommunications
K23 - Regulated Industries and Administrative Law
L51 - Economics of Regulation
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 18 Jan 2012 06:00
Last Modified: 07 Mar 2018 13:22
OAI ID: oai:tse-fr.eu:21961
URI: http://publications.ut-capitole.fr/id/eprint/3271

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