Mobile Termination and Mobile Penetration

37 Pages Posted: 14 Oct 2009

See all articles by Sjaak Hurkens

Sjaak Hurkens

Institute for Economic Analysis-CSIC; Barcelona GSE

Doh-Shin Jeon

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Multiple version iconThere are 2 versions of this paper

Date Written: July 8, 2009

Abstract

In this paper, we study how access pricing affects network competition when subscription demand is elastic and each network uses non-linear prices and can apply termination-based price discrimination. In the case of a fixed per minute termination charge, we find that a reduction of the termination charge below cost has two opposing effects: it softens competition but helps to internalize network externalities. The former reduces mobile penetration while the latter boosts it. We find that firms always prefer termination charge below cost for either motive while the regulator prefers termination below cost only when this boosts penetration. Next, we consider the retail benchmarking approach (Jeon and Hurkens, 2008) that determines termination charges as a function of retail prices and show that this approach allows the regulator to increase penetration without distorting call volumes.

Keywords: Mobile Penetration, Termination Charge, Access Pricing, Networks, Interconnection, Regulation, Telecommunications

JEL Classification: D4, K23, L51, L96

Suggested Citation

Hurkens, J.P.M. (Sjaak) and Jeon, Doh-Shin, Mobile Termination and Mobile Penetration (July 8, 2009). Available at SSRN: https://ssrn.com/abstract=1485364 or http://dx.doi.org/10.2139/ssrn.1485364

J.P.M. (Sjaak) Hurkens

Institute for Economic Analysis-CSIC

campus UAB
Bellaterra, 08193
Spain

Barcelona GSE ( email )

Barcelona
Spain
(34-93) 5806612 (Phone)
(34-93) 5801452 (Fax)

Doh-Shin Jeon (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34) 93 542 16 57 (Phone)
(34) 93 542 17 46 (Fax)

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