24 research outputs found
On The Role of Access Charges Under Network Competition
We aim to clarify the role of access charges under two-way network competition, employing a reduced-form approach. Retaining the key features of specific network competition models but imposing less structure, we analyze the impact of changes in access charges on linear and non-linear retail prices. We derive su.cient conditions for usage fees to be increasing (and subscriber charges to be decreasing) in access charges. These conditions are shown to be satisfied only under rather restrictive assumptions on the demand for calls, suggesting that implementing collusion by inflating access charges is likely to be nonfeasible.network competition, two-way access, collusion, nonlinear retail prices
Network Asymmetries and Access Pricing in Cellular Telecommunications
Network shares and retail prices are not symmetric in the telecommunications market with multiple bottlenecks which give rise to new questions of access fee regulation. In this paper we consider a model with two types of asymmetry arising from different entry timing, i.e. a larger reputation for the incumbent and lower cost of servicing for the entrant as a result of more advanced technology. As a result firms have divergent preferences over the access fee. In case of linear and non-linear prices the access fee might still act as the instrument of collusion, but only if a side-payment is permitted which is generally welfare decreasing. Moreover, in contrast with the European regulatory framework, the access fee on the basis of termination cost might not necessarily be a socially preferable solution.cost asymmetry, brand loyalty, imperfect competition, network interconnection, access fee
Mobile Termination and Mobile Penetration
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.
Mobile termination and mobile penetration
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 oppos- ing effects: it softens competition but helps to internalize network externalities. The former reduces mobile penetration while the latter boosts it. We find that firms al- ways 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.Mobile Penetration; Termination Charge; Access Pricing; Networks; Interconnection; Regulation; Telecommunications;
Mobile termination and mobile penetration
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.Mobile Penetration, Termination Charge, Access Pricing, Networks, Interconnection, Regulation, Telecommunications
Bundling and Collusion in Communications Markets
This paper deals with competition in communications markets between an
incumbent and an entrant. We analyze the effect of bundling strategy by
a firm who enters an incumbent market. This market dimension has
profound implications on the sustainability of collusion in an
infinitely repeated game framework. We show that the bundling strategy
of the entrant might hinder collusion. Futhermore, we consider a setting
in which the entrant uses a one-way access that the incumbent possesses.
In such situation, we show that when the entrant bundles its products, a
low access charge for call termination on the incumbent network might
increase the feasibility of collusion. This result has an important
policy implication
A Retail Benchmarking Approach to Efficient Two-way Access Pricing: Two-Part Tariffs
We study a retail benchmarking approach to determine access prices for
interconnected networks. Instead of considering fixed access charges as
in the existing literature, we study access pricing rules that determine
the access price that network i pays to network j as a linear function
of the marginal costs and the retail prices set by both networks. In the
case of competition in two-part tariffs, we consider a class of access
pricing rules, similar to the optimal one under competition in linear
prices, derived by Jeon (2005), but based on average retail prices. We
show that firms choose the variable price equal to the marginal cost
under the class of rules. Therefore, the regulator can choose one among
the rules to pursue additional objectives such as consumer surplus,
network coverage or investment: in particular, we show that the
regulator can achieve static and dynamic e±ciency at the same time
A retail benchmarking approach to efficient two-way access pricing
We study a retail benchmarking approach to determine access prices for interconnected networks. Instead of considering fixed access charges as in the existing literature, we study access pricing rules that determine the access price that network i pays to network j as a linear function of the marginal costs and the retail prices set by both networks. In the case of competition in linear prices, we show that there is a unique linear rule that implements the Ramsey outcome as the unique equilibrium, independently of the underlying demand conditions. In the case of competition in two-part tariffs, we consider a class of access pricing rules, similar to the optimal one under linear prices but based on average retail prices. We show that firms choose the variable price equal to the marginal cost under this class of rules. Therefore, the regulator (or the competition authority) can choose one among the rules to pursue additional objectives such as consumer surplus, network coverage or investment: for instance, we show that both static and dynamic e±ciency can be achieved at the same time.Networks, Access Pricing, Interconnection, Competition Policy, Telecommunications, Investment
A Retail Benchmarking Approach to Efficient Two-Way Access Pricing: Termination-Based Price Discrimination with Elastic Subscription Demand
We study how access pricing affects network competition when consumers'
subscription demand is elastic and networks compete with non-linear
prices and can use termination-based price discrimination. In the case
of a fixed per minute termination charge, our model generalizes the
results of Gans and King (2001), Dessein (2003) and Calzada and Valletti
(2008). We show that a reduction of the termination charge below cost
has two opposing effects: it softens competition and it helps to
internalize network externalities. The former reduces consumer surplus
while the latter increases it. Firms always prefer termination charge
below cost, either to soften competition or to internalize the network
effect. The regulator will favor termination below cost only when this
boosts market 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 subscription without distorting call volumes.
Furthermore, we show that an informed regulator can even implement the
first-best outcome by using this approach