IDEAS home Printed from https://ideas.repec.org/a/eee/telpol/v30y2006i7p368-384.html
   My bibliography  Save this article

Mobile termination: Market power, externalities and their policy implications

Author

Listed:
  • Albon, Rob
  • York, Richard

Abstract

Without regulation, market power in mobile termination is likely to result in mobile termination rates (MTRs) in excess of costs and cross-subsidised prices for mobile subscription/handsets. Mobile network operators (MNOs) argue that subsidisation is efficient, being justified by, inter alia, a network externality on new mobile subscriptions. However, especially in mature markets, the argument here is that MNOs will tend to set MTRs inefficiently high and subscription prices will be driven inefficiently low. Regulation is necessary to prevent these inefficiencies. Further, other externalities have different implications--e.g., the mobile call-receipt externality suggests a subsidy to mobile termination. The conclusion is that on balance and in the absence of detailed empirical estimation of the size of a multitude of possible types of externality, it is likely to be efficient to set MTRs to cost in markets with high penetration.

Suggested Citation

  • Albon, Rob & York, Richard, 2006. "Mobile termination: Market power, externalities and their policy implications," Telecommunications Policy, Elsevier, vol. 30(7), pages 368-384, August.
    • Handle: RePEc:eee:telpol:v:30:y:2006:i:7:p:368-384
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0308596106000474
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Julian Wright, 2002. "Access Pricing under Competition: An Application to Cellular Networks," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 289-315, September.
    2. Gans, Joshua S. & King, Stephen P., 2000. "Mobile network competition, customer ignorance and fixed-to-mobile call prices," Information Economics and Policy, Elsevier, vol. 12(4), pages 301-327, December.
    3. R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 24(1), pages 11-32.
    4. Joshua S. Gans & Stephen P. King & Julian Wright, 2005. "Wireless Communications," Monash Economics Working Papers archive-45, Monash University, Department of Economics.
    5. Harberger, Arnold C, 1971. "Three Basic Postulates for Applied Welfare Economics: An Interpretive Essay," Journal of Economic Literature, American Economic Association, vol. 9(3), pages 785-797, September.
    6. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rob Albon, 2006. "Fixed-to-Mobile Substitution, Complementarity and Convergence," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 13(4), pages 309-322.
    2. Hahn, Robert & Evans, Lewis, 2010. "Regulating Dynamic Markets: Progress in Theory and Practice," Working Paper Series 4052, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    3. repec:vuw:vuwscr:19155 is not listed on IDEAS
    4. Parsons, Steve G. & Duffy-Deno, Kevin T., 2021. "Are telecommunications regulators correct in their beliefs that network size affects origination/termination?," Telecommunications Policy, Elsevier, vol. 45(2).
    5. Baigorri, Carlos M. & Maldonado, Wilfredo F.L., 2014. "Optimal mobile termination rate: The Brazilian mobile market case," Telecommunications Policy, Elsevier, vol. 38(1), pages 86-95.
    6. Rob Albon, 2012. "Beyond Traditional Regulatory Models: Emerging Governance for New Networks," Chapters, in: Gerald R. Faulhaber & Gary Madden & Jeffrey Petchey (ed.), Regulation and the Performance of Communication and Information Networks, chapter 2, Edward Elgar Publishing.
    7. Casey, Thomas R. & Töyli, Juuso, 2012. "Mobile voice diffusion and service competition: A system dynamic analysis of regulatory policy," Telecommunications Policy, Elsevier, vol. 36(3), pages 162-174.
    8. Basaran, Alparslan A. & Cetinkaya, Murat & Bagdadioglu, Necmiddin, 2014. "Operator choice in the mobile telecommunications market: Evidence from Turkish urban population," Telecommunications Policy, Elsevier, vol. 38(1), pages 1-13.
    9. Cricelli, Livio & Grimaldi, Michele & Levialdi Ghiron, Nathan, 2012. "The impact of regulating mobile termination rates and MNO–MVNO relationships on retail prices," Telecommunications Policy, Elsevier, vol. 36(1), pages 1-12.
    10. Alfred Vanags, 2010. "Mobile Termination: How to Regulate or Perhaps Not to Regulate at All?," TeliaSonera Institute Discussion papers 8, Baltic International Centre for Economic Policy Studies (BICEPS);Stockholm School of Economics in Riga (SSE Riga).
    11. Francesca Di Pillo & Livio Cricelli & Massimo Gastaldi & Nathan Levialdi, 2010. "Asymmetry in mobile access charges: is it an effective regulatory measure?," Netnomics, Springer, vol. 11(3), pages 291-314, October.
    12. Hahn, Robert & Evans, Lewis, 2010. "Regulating Dynamic Markets: Progress in Theory and Practice," Working Paper Series 19155, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vogelsang, Ingo, 2010. "The relationship between mobile and fixed-line communications: A survey," Information Economics and Policy, Elsevier, vol. 22(1), pages 4-17, March.
    2. Christos Genakos & Tommaso Valletti, 2015. "Evaluating a Decade of Mobile Termination Rate Regulation," Economic Journal, Royal Economic Society, vol. 125(586), pages 31-48, August.
    3. Hoernig, Steffen, 2014. "Competition between multiple asymmetric networks: Theory and applications," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 57-69.
    4. Ambjørnsen, Terje & Foros, Øystein & Wasenden, Ole-Christian B., 2011. "Customer ignorance, price-cap regulation, and rent-seeking in mobile roaming," Information Economics and Policy, Elsevier, vol. 23(1), pages 27-36, March.
    5. Joan Calzada & Francesc Trillas, 2005. "The interconnection prices in telecomunications: from theory to practice," Hacienda Pública Española / Review of Public Economics, IEF, vol. 173(2), pages 85-125, June.
    6. Genakos, Christos & Valletti, Tommaso, 2011. "Seesaw in the air: Interconnection regulation and the structure of mobile tariffs," Information Economics and Policy, Elsevier, vol. 23(2), pages 159-170, June.
    7. Harbord, David & Pagnozzi, Marco, 2008. "On-Net/Off-Net Price Discrimination and 'Bill-and-Keep' vs. 'Cost-Based' Regulation of Mobile Termination Rates," MPRA Paper 14540, University Library of Munich, Germany.
    8. Genakos, Christos & Valletti, Tommaso, 2012. "Regulating prices in two-sided markets: The waterbed experience in mobile telephony," Telecommunications Policy, Elsevier, vol. 36(5), pages 360-368.
    9. Armstrong, Mark & Wright, Julian, 2007. "Mobile call termination in the UK," MPRA Paper 2344, University Library of Munich, Germany.
    10. Alfred Vanags, 2010. "Mobile Termination: How to Regulate or Perhaps Not to Regulate at All?," TeliaSonera Institute Discussion papers 8, Baltic International Centre for Economic Policy Studies (BICEPS);Stockholm School of Economics in Riga (SSE Riga).
    11. Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, vol. 119(538), pages 270-307, June.
    12. 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.
    13. Tikoudis, Ioannis, 2023. "Revisiting the Pigouvian tax in urban roads: Housing supply restrictions, leaking profits and spatial inequality," Economics of Transportation, Elsevier, vol. 35(C).
    14. Hurkens, Sjaak & Jeon, Doh-Shin, 2009. "Mobile termination and mobile penetration," IESE Research Papers D/816, IESE Business School.
    15. Littlechild, S.C., 2004. "‘Mobile Termination Charges: Calling Party Pays versus Receiving Party Pays’(original and revised versions)," Cambridge Working Papers in Economics 0426, Faculty of Economics, University of Cambridge.
    16. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
    17. de Bijl, P.W.J. & Brunekreeft, G. & van Damme, E.E.C. & Larouche, P. & Shelkoplyas, N. & Sorana, V., 2004. "Interconnected Networks," Other publications TiSEM 10a647e2-6c24-4b98-8005-e, Tilburg University, School of Economics and Management.
      • de Bijl, P.W.J. & Brunekreeft, G. & van Damme, E.E.C. & Larouche, P. & Shelkoplyas, N. & Sorana, V., 2005. "Interconnected Networks," Other publications TiSEM 2fe44772-cc8d-4be2-aff4-3, Tilburg University, School of Economics and Management.
      • de Bijl, P.W.J. & Brunekreeft, G. & van Damme, E.E.C. & Larouche, P. & Shelkoplyas, N. & Sorana, V., 2005. "Interconnected Networks," Discussion Paper 2005-007, Tilburg University, Tilburg Law and Economic Center.
    18. Yu-Shan Lo, "undated". "Market Shares, Consumer Ignorance and the Reciprocal Termination Charges," Discussion Papers 09/19, Department of Economics, University of York.
    19. Doh‐Shin Jeon & Sjaak Hurkens, 2008. "A retail benchmarking approach to efficient two‐way access pricing: no termination‐based price discrimination†," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 822-849, September.
    20. Stefan Buehler & Justus Haucap, 2004. "Mobile Number Portability," Journal of Industry, Competition and Trade, Springer, vol. 4(3), pages 223-238, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:telpol:v:30:y:2006:i:7:p:368-384. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/30471/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.