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Mobile termination and mobile penetration

Author

Listed:
  • Hurkens, Sjaak

    (Institute for Economic Analysis)

  • Jeon, Doh-Shin

    (Toulouse School of Economics)

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 oppos- ing effects: it softens competition but helps to internalize network externalities. The former reduces mobile penetration while the latter boosts it. We find that firms al- ways 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.

Suggested Citation

  • Hurkens, Sjaak & Jeon, Doh-Shin, 2009. "Mobile termination and mobile penetration," IESE Research Papers D/816, IESE Business School.
    • Handle: RePEc:ebg:iesewp:d-0816
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Sjaak Hurkens & Ángel Luis López, 2010. "Mobile Termination and Consumer Expectations under the Receiver-Pays Regime," Working Papers 10-12, NET Institute.
    2. 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.
    3. Hurkens, Sjaak & López, Ángel L., 2012. "The welfare effects of mobile termination rate regulation in asymmetric oligopolies: The case of Spain," Telecommunications Policy, Elsevier, vol. 36(5), pages 369-381.
    4. Sjaak Hurkens & Ángel L. López, 2014. "Mobile Termination, Network Externalities and Consumer Expectations," Economic Journal, Royal Economic Society, vol. 124(579), pages 1005-1039, September.
    5. Hurkens, Sjaak & Jeon, Doh-Shin, 2012. "Promoting network competition by regulating termination charges," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 541-552.
    6. Harrison, Rodrigo & Hernandez, Gonzalo & Muñoz, Roberto, 2019. "A discrete model of market interaction in the presence of social networks and price discrimination," Mathematical Social Sciences, Elsevier, vol. 102(C), pages 48-58.
    7. Tommaso Majer & Michele Pistollato, 2016. "Calling vs. Receiving Party Pays," Competition and Regulation in Network Industries, , vol. 17(2), pages 150-180, June.

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    More about this item

    Keywords

    Mobile Penetration; Termination Charge; Access Pricing; Networks; Interconnection; Regulation; Telecommunications;
    All these keywords.

    JEL classification:

    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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