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Market Penetration and Late Entry in Mobile Telephony

29 Pages Posted: 30 Oct 2008  

Steffen Hoernig

Nova School of Business and Economics

Date Written: October 1, 2008


We consider some two dynamic models of entry in mobile telephony, with and without strategic pricing, and taking into account market penetration at entry, locked-in consumers and tariff-mediated network externalities. We show that on/off-net differentials may reduce the possibility of entry if incumbents are large, while they have no long-run effects if there are no locked-in consumers, or reduce the difference in subscriber numbers in their presence. Asymmetric fixed-to-mobile or mobile-to-mobile termination rates increase (decrease) market share and profit of the network with the higher (lower) rate. While the fixed-to-mobile waterbed effect is not full at the network level, it will be full in the aggregate.

Keywords: Mobile Telephony, Entry, Penetration, Mobile termination

JEL Classification: L13, L51, L96

Suggested Citation

Hoernig, Steffen, Market Penetration and Late Entry in Mobile Telephony (October 1, 2008). NET Institute Working Paper No. 08-38. Available at SSRN: or

Steffen Hoernig (Contact Author)

Nova School of Business and Economics ( email )

Universidade Nova de Lisboa
Campus de Campolide
Lisboa, 1099-032
+351-213801600 (Phone)


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