Mobile Termination and Mobile Penetration

Sjaak Hurkens and Doh-Shin Jeon

No 575, IDEI Working Papers from Institut d'Économie Industrielle (IDEI), Toulouse

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.

JEL-codes: D4 K23 L51 L96 (search for similar items in EconPapers)
Date: 2009-07
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Mobile Termination and Mobile Penetration (2015)
Working Paper: Mobile Termination and Mobile Penetration (2009)
Working Paper: Mobile termination and mobile penetration (2009)
Working Paper: Mobile Termination and Mobile Penetration (2009)
Working Paper: Mobile termination and mobile penetration (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ide:wpaper:21220

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