Mobile Network Competition, Customer Ignorance and Fixed-to-Mobile Call Prices

32 Pages Posted: 3 Mar 2000

See all articles by Joshua S. Gans

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

Stephen P. King

Monash University - Department of Economics; Productivity Commission

Date Written: February 14, 2000

Abstract

This paper examines the influence of mobile network competition on the prices of fixed-to-mobile calls. Because fixed line customers cannot, in general, distinguish the identity of a specific mobile network, these networks have market power when setting termination charges for calls from fixed lines. We show that: (1) unregulated mobile termination charges will result in higher than monopoly call prices; (2) the regulation of termination charges and prices downward will affect mobile subscription rates and may lower these rates; and (3) regulation of any mobile carrier's termination charges can reduce fixed to mobile prices but will result in an increase in unregulated carriers' termination charges. When fixed line consumers can distinguish between the different mobile networks they are calling, fixed to mobile call prices will fall relative to their level under customer ignorance. Direct mobile charging for termination also exerts downward pressure on the total fixed to mobile call price. A low cost method of lowering fixed to mobile charges would be to facilitate the identification of carriers by consumers and to restructure billing so that mobile networks are able to directly charge fixed line consumers for termination services.

JEL Classification: L41, L96

Suggested Citation

Gans, Joshua S. and King, Stephen Peter, Mobile Network Competition, Customer Ignorance and Fixed-to-Mobile Call Prices (February 14, 2000). Available at SSRN: https://ssrn.com/abstract=210628 or http://dx.doi.org/10.2139/ssrn.210628

Joshua S. Gans (Contact Author)

University of Toronto - Rotman School of Management ( email )

Canada

HOME PAGE: http://www.joshuagans.com

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Stephen Peter King

Monash University - Department of Economics ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Productivity Commission ( email )

Level 28
35 Collins St.
Melbourne, Victoria, Victoria 3000
Australia

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