The Effects of Regulating Mobile Termination Rates for Asymmetric Networks

Abstract

This paper examines mobile termination fees and their regulation when networks are asymmetric in size. It is demonstrated that with consumer ignorance about the exact termination rates (a) a mobile network’s termination rate is the higher the smaller the network’s size (as measured through its subscriber base) and (b) asymmetric regulation of only the larger operators in a market will, ceteris paribus, induce the smaller operators to increase their termination rates. The results are supported by empirical evidence using data on mobile termination rates from 48 European mobile operators from 2001 to 2003.

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Correspondence to Ralf Dewenter.

Additional information

For most helpful comments and discussions, we thank Michael Bräuninger, Jörn Kruse, Johannes Mönius and three anonymous referees as well as seminar participants at Marburg, Bremen, the 4th ZEW-Conference on the Economics of Information and Communication Technologies at Mannheim, the International Industrial Organization Conference at Chicago, and the 15th Biennial Conference of the International Telecommunications Society (ITS) at Berlin. Furthermore, we are grateful to Tobias Hartwich for his critical review of the manuscript. Of course, the usual disclaimer applies.

JEL Classification: L13, L51, L96

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Dewenter, R., Haucap, J. The Effects of Regulating Mobile Termination Rates for Asymmetric Networks. Eur J Law Econ 20, 185–197 (2005). https://doi.org/10.1007/s10657-005-1736-z

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Keywords

  • mobile termination
  • telecommunications
  • consumer ignorance
  • price regulation