On-Net/Off-Net Price Discrimination and 'Bill-and-Keep' vs. 'Cost-Based' Regulation of Mobile Termination Rates

Harbord, David and Pagnozzi, Marco (2008): On-Net/Off-Net Price Discrimination and 'Bill-and-Keep' vs. 'Cost-Based' Regulation of Mobile Termination Rates.

Abstract

This paper surveys the recent literature on competition between mobile network operators in the presence of call externalities and network effects. It shows that the regulation of mobile termination rates based on “long-run incremental costs” increases networks’ strategic incentives to inefficiently set high on-net/off-net price differentials, thus harming smaller networks and new entrants. The paper argues in favor of a “bill-and-keep” system for mobile-to-mobile termination, and presents international evidence in support of this conclusion.

• Item Type: MPRA Paper
• Language: English
• Keywords: mobile termination, network effects, call externalities, bill-and-keep
• Subjects: L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L96 - Telecommunications; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection

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