On-Net and Off-Net Pricing on Asymmetric Telecommunications Networks

29 Pages Posted: 28 Jun 2006

See all articles by Steffen Hoernig

Steffen Hoernig

Nova School of Business and Economics

Date Written: March 2006

Abstract

The differential between on-net and off-net prices, for example on mobile telephony networks, is an issue that is hotly debated between telecoms operators and regulators. Small operators contend that their competitors' high off-net prices are anticompetitive. We show that if the utility of receiving calls is taken into account, the equilibrium pricing structures will indeed depend on firms' market shares. Larger firms will charge higher off-net prices even without anticompetitive intent, both under linear and two-part tariffs. Predative behavior would be accompanied by even larger on-net/off-net differentials even if access charges are set at cost.

Keywords: Telecommunications network competition, on/off-net pricing, asymmetry, call externality

Suggested Citation

Hoernig, Steffen, On-Net and Off-Net Pricing on Asymmetric Telecommunications Networks (March 2006). CEPR Discussion Paper No. 5588, Available at SSRN: https://ssrn.com/abstract=912725

Steffen Hoernig (Contact Author)

Nova School of Business and Economics ( email )

Campus De Carcavelos
Rua Da Holanda 1
Carcavelos, 2775-405
Portugal
+351-213801600 (Phone)

HOME PAGE: http://https://www2.novasbe.unl.pt/en/faculty-research/faculty/faculty-detail/id/46/steffen-hoernig

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