Mobile Call Termination

Armstrong, Mark and Wright, Julian (2007): Mobile Call Termination.

Abstract

Motivated by recent UK experience, we study the problem of mobile call termination. This is an intriguing policy story, in which regulation has been imposed on what appears to be a competitive industry. We introduce a framework which integrates two existing literatures: one analyzing fixed-to-mobile call termination (where the predicted market failure involves the termination charge being set at the monopoly level), and one analyzing mobile-to-mobile network interconnection (where the predicted termination charge is below the efficient level). Our unified framework allows us to consider the impact of wholesale arbitrage and demand-side substitution. With these features, we find the unregulated termination charge lies between the efficient and the monopoly benchmarks. There remains a rationale for regulation, albeit reduced relative to the earlier literature.

• Item Type: MPRA Paper
• Institution: Department of Economics, University College London
• Language: English
• Keywords: Regulation; Mobile telephony; Oligopoly; Two-sided markets
• Subjects: L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L96 - Telecommunications; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection