Competition vs. Regulation in Mobile Telecommunications

Abstract:     
This paper questions whether competition can replace sector-specific regulation of mobile telecommunications. We show that the monopolistic outcome prevails independently of market concentration when access prices are determined in bilateral negotiations. A light-handed regulatory policy can induce effective competition. Call prices are close to the marginal cost if the networks are sufficiently close substitutes. Neither demand nor cost information is required. A unique and symmetric call price equilibrium exists under symmetric access prices, provided that call demand is sufficiently inelastic. Existence encompasses the case of many networks and high network substitutability.

Number of Pages in PDF File: 52

Keywords: Access price competition, entry, network competition, network substitutability, regulation, two-way access

JEL Classification: L51, L96

working papers series