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Evaluating a decade of mobile termination rate regulation

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Abstract

We re-consider the impact that regulation of call termination on mobile phones has had on mobile customers’ bills. Using a large panel covering 27 countries, we find that the “waterbed” phenomenon, initially observed until early 2006, has disappeared over the 10-year period, 2002-2011. We argue that this is due to the changing nature of the industry, whereby mobile-to-mobile traffic now plays a much bigger role compared to fixed-to-mobile calls in earlier periods. This implies that regulation does not have unintended consequences anymore. Over the same decade, there is no evidence that regulation caused a reduction in mobile operators’ profits and investments.

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  • Christos Genakos & Tommaso Valletti, 2014. "Evaluating a decade of mobile termination rate regulation," CEIS Research Paper 303, Tor Vergata University, CEIS, revised 10 Jan 2014.
    • Handle: RePEc:rtv:ceisrp:303
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    1. Ralf Dewenter & Justus Haucap, 2005. "The Effects of Regulating Mobile Termination Rates for Asymmetric Networks," European Journal of Law and Economics, Springer, vol. 20(2), pages 185-197, September.
    2. Jullien, Bruno & Rey, Patrick & Sand-Zantman, Wilfried, 2009. "Mobile Call Termination Revisited," TSE Working Papers 10-198, Toulouse School of Economics (TSE), revised Aug 2010.
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    4. 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.
    5. Steffen Hoernig & Roman Inderst & Tommaso Valletti, 2014. "Calling circles: network competition with nonuniform calling patterns," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 155-175, March.
    6. 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.
    7. Joshua S. Gans & Stephen P. King & Julian Wright, 2005. "Wireless Communications," Monash Economics Working Papers archive-45, Monash University, Department of Economics.
    8. Peitz, Martin & Waldfogel, Joel, 2012. "The Oxford Handbook of the Digital Economy," OUP Catalogue, Oxford University Press, number 9780195397840.
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    Cited by:

    1. Muñoz-Acevedo, Ángela & Grzybowski, Lukasz, 2023. "Impact of roaming regulation on revenues and prices of mobile operators in the EU," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    2. Vogelsang, Ingo, 2019. "Has Europe missed the endgame of telecommunications policy?," Telecommunications Policy, Elsevier, vol. 43(1), pages 1-10.
    3. Hawthorne, Ryan & Grzybowski, Lukasz, 2021. "Distribution of the benefits of regulation vs. competition: The case of mobile telephony in South Africa," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    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. Shane Greenstein & Martin Peitz & Tommaso Valletti, 2016. "Net Neutrality: A Fast Lane to Understanding the Trade-Offs," Journal of Economic Perspectives, American Economic Association, vol. 30(2), pages 127-150, Spring.
    6. Hawthorne, Ryan, 2018. "The effects of lower mobile termination rates in South Africa," Telecommunications Policy, Elsevier, vol. 42(5), pages 374-385.
    7. Peitz, Martin & Valletti, Tommaso, 2015. "Reassessing competition concerns in electronic communications markets," Telecommunications Policy, Elsevier, vol. 39(10), pages 896-912.
    8. Bouali, Safieddine, 2017. "Regulated termination rates and competition among Tunisian mobile network operators. Barriers, bias, and incentives," Telecommunications Policy, Elsevier, vol. 41(7), pages 573-586.
    9. Ryan Hawthorne & Lukasz Grzybowski, 2019. "Benefits of Regulation vs. Competition Where Inequality Is High: The Case of Mobile Telephony in South Africa," CESifo Working Paper Series 7703, CESifo.
    10. Anderson, Simon P. & Peitz, Martin, 2020. "Media see-saws: Winners and losers in platform markets," Journal of Economic Theory, Elsevier, vol. 186(C).
    11. Mothobi, Onkokame, 2022. "The impact of telecommunication regulatory policy on mobile retail price in Sub-Saharan African countries," Information Economics and Policy, Elsevier, vol. 58(C).
    12. Vogelsang, Ingo, 2017. "Regulatory inertia versus ICT dynamics: The case of product innovations," Telecommunications Policy, Elsevier, vol. 41(10), pages 978-990.
    13. Hurkens, Sjaak & López, Ángel L., 2021. "Mobile termination rates and retail regimes in Europe and the US: A unified theory of CPP and RPP," Information Economics and Policy, Elsevier, vol. 56(C).
    14. Amassaghrou, Soumaya & Gutiérrez-Hita, Carlos & Zhukova, Vita, 2022. "An assessment of the liberalization and the evolution of competition in the Moroccan mobile market," Telecommunications Policy, Elsevier, vol. 46(5).
    15. Hawthorne, Ryan, 2016. "Do call termination rate interventions affect developing countries (with smaller fixed line networks) differently? Testing for the ‘waterbed effect' for non-linear tariffs in South Africa," 27th European Regional ITS Conference, Cambridge (UK) 2016 148673, International Telecommunications Society (ITS).
    16. Tangerås, Thomas P. & Tåg, Joacim, 2016. "International network competition under national regulation," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 152-185.

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    More about this item

    Keywords

    regulation; telephony; termination rates; waterbed effect;
    All these keywords.

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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