Link between termination rates and retail prices in Namibia, Kenya and South Africa

Christoph Stork and Alison Gillwald

Telecommunications Policy, 2014, vol. 38, issue 8, 783-797

Abstract: This paper analyses the link between mobile termination rate reductions and retail prices. It draws on in-depth case studies of South Africa, Namibia and Kenya where regulators have reduced termination rates towards the cost of an efficient operator. To varying degrees these have all led to lower retail prices and significant market expansion. While retail prices in both Namibia and Kenya dropped following substantial termination rate reductions, the South African case demonstrates that termination rate reductions are not always passed on to consumers as is hoped by such regulatory interventions. In South Africa, it was only after the second reduction in March 2012 that smaller operators were able to reduce their off-net prices to a level that could tempt the subscribers to dominant operators to switch. All the case studies confirm nevertheless that retail prices do not go up in response to termination rates going down as contended by dominant mobile operators around the world. This is in contrast to a body of literature stating that termination rates and mobile retail prices constitute a two-sided market and that termination rate reductions will lead to a so-called “waterbed effect”.

Keywords: Mobile termination rates; Retail prices; Waterbed effect; Two-sided markets; South Africa; Kenya; Namibia (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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DOI: 10.1016/j.telpol.2014.06.002

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