Price Squeeze in Practice: Is it a Profitable Strategy?

Price squeeze has been an important issue in the telecommunications market as many incumbent operators have exercised this strategy in order to foreclose competitive entrants (see Polo (2008), Bravo and Siciliani (2007), Geradin and O'Donoghue (2005) and Crocioni and Veljanovski (2003). The experience in all European cases considered in these studies shows the difficulty and complexity faced by regulators in implementing the imputation analysis. In the US some Courts have followed a different approach and some authors do not consider margin squeeze as an abuse by a dominant operator (see also Crandall and Singer (2007), Carlton (2008) and Sidak (2008)). The role of the present paper is to examine critically the decision of the Greek regulator on a price squeeze allegedly applied by the Greek incumbent OTE through its subsidiary OTEnet on the market for broadband services. In doing so, a number of important questions arise: Why the regulator used the REO test instead of the EEO test that has been applied in almost all antitrust cases? What is a legitimate or sufficient margin under which a margin squeeze occurs? Can a price squeeze lead to falling market shares for the incumbent and rising market shares for the entrants? Should the NCA intervene just after one year from the opening of the market? In this paper we attempt to answer the above questions and relate our results to the existing literature. --

Price Squeeze in Practice: Is it a Profitable Strategy?

Price squeeze has been an important issue in the telecommunications market as many incumbent operators have exercised this strategy in order to foreclose competitive entrants (see Polo (2008), Bravo and Siciliani (2007), Geradin and O'Donoghue (2005) and Crocioni and Veljanovski (2003). The experience in all European cases considered in these studies shows the difficulty and complexity faced by regulators in implementing the imputation analysis. In the US some Courts have followed a different approach and some authors do not consider margin squeeze as an abuse by a dominant operator (see also Crandall and Singer (2007), Carlton (2008) and Sidak (2008)). The role of the present paper is to examine critically the decision of the Greek regulator on a price squeeze allegedly applied by the Greek incumbent OTE through its subsidiary OTEnet on the market for broadband services. In doing so, a number of important questions arise: Why the regulator used the REO test instead of the EEO test that has been applied in almost all antitrust cases? What is a legitimate or sufficient margin under which a margin squeeze occurs? Can a price squeeze lead to falling market shares for the incumbent and rising market shares for the entrants? Should the NCA intervene just after one year from the opening of the market? In this paper we attempt to answer the above questions and relate our results to the existing literature

MARGIN SQUEEZE IN THE U.S. AND THE EU: WHY THEY DIFFER?

Margin squeeze has recently emerged as an important issue in the electronic communications markets in the EU, as many incumbent operators have exercised this strategy in order to foreclose competitive new entrants. The experience in all European cases considered in the literature so far shows the difficulty and complexity faced by the competition enforcement authorities in implementing the appropriate imputation test for the purpose of substantiating an abuse of the dominant position. In the US, some Courts have followed a different approach and some authors do not consider margin squeeze as a stand-alone form of anti-competitive conduct. Recent Court decisions have validated these claims and there is a renewed interest on the question of the usefulness of margin squeeze tests in protecting competition and consumers. In the economic literature, there are two imputation tests that can be applied to demonstrate an abusive margin squeeze. The first test known as the Equally Efficient Operator (EEO) test is based on the costs of the incumbent. The second test known as the Reasonably Efficient Operator (REO) test is based on the costs of the entrant. The aim of the present paper is to analyze these tests and stress their weaknesses as policy tools. In doing so we will compare the different approaches on the issue of margin squeeze by the EU and the US antitrust authorities. Furthermore, we will offer some thoughts on how the margin squeeze problem can be tackled from a dynamic point of view

The Effect of Patent Grant on the Geographic Reach of Patent Sales

This paper examines whether patents increase the geographic reach of the market for ideas. By employing a dataset of 25,127 US patents traded between US located firms, we find that patents sold during application phase are less likely to be traded outside the seller‟s state than patents that have been issued. To tackle the endogeneity issues we employ coarsened exact matching techniques. We find that patent grant increases the likelihood of a patent to be traded across boundaries of the state. This evidence is stronger for patents originating from the less innovative US states

Pricing policy and regulation in the Greek telecommunications market

The paper examines the pricing policy that has been implemented by the Greek Telecommunications Organization (OTE) in the last seven years, as well as the role that the regulator has played in the setting of these prices. These prices are then compared to the respective ones in countries of the EU and the issues of rebalancing and regulatory capture are examined. It is shown that th e prices charged by OTE in the long-distance and international telephony are very high, whereas the price of the local call is very low. Furthermore, the imposition of the price caps by the NRA is characterized by regulatory capture.

Determinants of Mobile Broadband Penetration: An Empirical International Study

This study examines relevant factors that determine mobile broadband penetration for a large set of international countries, using instrumental variables econometric techniques. Furthermore it tests for stationarity of the variables using appropriate tests when cross sectional dependence is present. In respect to our main findings we conclude that lower cost of mobile services internet content facilitates mobile broadband diffusion. Moreover we highlight the importance of developing e-services in promoting mobile broadband. In addition we find that mobile and fixed broadband are complements signifying that they are beneficial spillover effects in promoting either of them. Concerning socioeconomic factors we find that factors such as education, income, percentage of urban population and percentage of population between 15-64 years old incite mobile broadband proliferation. Finally countries with multiple mobile standards have significantly higher mobile broadband penetration