Mobile Call Termination
35 Pages Posted: 13 Sep 2007
Date Written: September 2007
Motivated by recent UK experience, we study the problem of mobile call termination. This is an intriguing policy story, in which regulation has been imposed on what appears to be a competitive industry. We introduce a framework which integrates two existing literatures: one analyzing fixed-to-mobile call termination (where the predicted market failure involves the termination charge being set at the monopoly level), and one analyzing mobile-to-mobile network interconnection (where the predicted termination charge is below the efficient level). Our unified framework allows us to consider the impact of wholesale arbitrage and demand-side substitution. With these features, we find the unregulated termination charge lies between the efficient and the monopoly benchmarks. There remains a rationale for regulation, albeit reduced relative to the earlier literature.
Keywords: telecommunications, access pricing, interconnection, competitive bottleneck
JEL Classification: L12, L41, L51, L96
Suggested Citation: Suggested Citation