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Bargaining Over Fixed-To-Mobile Termination Rates: Countervailing Buyer Power As A Constraint On Monopoly Power

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  • Ken Binmore
  • David Harbord

Abstract

The conventional wisdom that mobile operators are able to act as monopolists in pricing call termination on their networks has recently been challenged by Hutchison 3G's entry into European mobile markets. The European Commission's electronic communications regime allows national regulatory authorities to regulate mobile termination rates if an operator is found to possess ‘significant market power’. This requires that the mobile operator not be constrained by the ‘countervailing buyer power’ of incumbents. The claim that incumbent operators possess countervailing buyer power has been dismissed repeatedly because of their obligation to interconnect with other networks. This conclusion is erroneous. We analyse bargaining over fixed-to-mobile termination rates and demonstrate that the existence of an interconnectivity obligation is entirely consistent with new entrants such as Hutchison 3G having no market power at all in pricing call termination on their own networks.

Suggested Citation

  • Ken Binmore & David Harbord, 2005. "Bargaining Over Fixed-To-Mobile Termination Rates: Countervailing Buyer Power As A Constraint On Monopoly Power," Journal of Competition Law and Economics, Oxford University Press, vol. 1(3), pages 449-472.
    • Handle: RePEc:oup:jcomle:v:1:y:2005:i:3:p:449-472.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhi013
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    Citations

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    Cited by:

    1. Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, vol. 119(538), pages 270-307, June.
    2. 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.
    3. David Harbord & Steffen Hoernig, 2015. "Welfare Analysis of Regulating Mobile Termination Rates in the U.K," Journal of Industrial Economics, Wiley Blackwell, vol. 63(4), pages 673-703, December.
    4. 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.
    5. 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.
    6. 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.
    7. Christos Genakos & Tommaso Valletti, 2011. "Testing The “Waterbed” Effect In Mobile Telephony," Journal of the European Economic Association, European Economic Association, vol. 9(6), pages 1114-1142, December.
    8. Tommaso Valletti, 2009. "Mobile Call Termination: A Tale of Two-Sided Markets," Chapters, in: François Lévêque & Howard Shelanski (ed.), Antitrust and Regulation in the EU and US, chapter 7, Edward Elgar Publishing.
    9. Brito, Duarte & Pereira, Pedro, 2009. "Product differentiation when competing with the suppliers of bottleneck inputs," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 43-53, January.
    10. Jerry A. Hausman, 2012. "Two-sided Markets with Substitution: Mobile Termination Revisited," Chapters, in: Gerald R. Faulhaber & Gary Madden & Jeffrey Petchey (ed.), Regulation and the Performance of Communication and Information Networks, chapter 13, Edward Elgar Publishing.

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