International network competition under national regulation

Thomas Tangerås () and Joacim Tåg

International Journal of Industrial Organization, 2016, vol. 47, issue C, 152-185

Abstract: We extend the workhorse model of network competition to international calls. This model enables us to show that national regulatory authorities (NRAs) maximizing domestic welfare have incentives to increase termination rates above the social optimum to extract rent from international call termination. Excessive termination rates distort prices but transfer surplus from foreign to domestic consumers via intensified network competition. The model can explain the regulation of termination rates through rate floors. International network ownership and deregulation are alternatives to combat the incentives of NRAs to distort termination rates. We identify conditions under which each of these policies increases aggregate welfare.

Keywords: Conglomerate merger; International markets; National regulation; Network competition; Telecommunications; Termination rates (search for similar items in EconPapers)
JEL-codes: L51 L96 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:47:y:2016:i:c:p:152-185

DOI: 10.1016/j.ijindorg.2016.04.006

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