Fixed-Mobile Integration

Abstract

Often, fi…xed-line incumbents also own the largest mobile network. We consider the effect of this joint ownership on market outcomes. Our model predicts that while …fixed-to-mobile call prices to the integrated mobile network are more efficient than under separation, those to rival mobile networks are distorted upwards, amplifying any incumbency advantage. As concerns potential remedies, a uniform off-net pricing constraint leads to higher welfare than functional separation and even allows to maintain some of the efficiency gains.

Keywords: Network competition, On/off-net pricing, Integration, Call externality

JEL Classification: L51, L92