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Bargaining Over Fixed-to-Mobile Termination Rates in the Shadow of the Regulator

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  • Binmore, Ken
  • Harbord, David

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 repeatedly dismissed 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

  • Binmore, Ken & Harbord, David, 2005. "Bargaining Over Fixed-to-Mobile Termination Rates in the Shadow of the Regulator," MPRA Paper 3248, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:3248
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    File URL: https://mpra.ub.uni-muenchen.de/3622/1/MPRA_paper_3622.pdf
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    References listed on IDEAS

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    1. Jean-Jacques Laffont & Patrick Rey & Jean Tirole, 1998. "Network Competition: I. Overview and Nondiscriminatory Pricing," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 1-37, Spring.
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    Cited by:

    1. Cunningham, Brendan M. & Alexander, Peter J. & Candeub, Adam, 2010. "Network growth: Theory and evidence from the mobile telephone industry," Information Economics and Policy, Elsevier, vol. 22(1), pages 91-102, March.

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    More about this item

    Keywords

    Bargaining; countervailing buyer power; regulation; telecommunications;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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