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

Author(s): Steffen Hoernig

Publication Date: March 2006

Keyword(s): asymmetry, call externality, on/off-net pricing and telecommunications network competition

Programme Area(s): Industrial Organization

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.

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Bibliographic Reference

Hoernig, S. 2006. 'On-Net and Off-Net Pricing on Asymmetric Telecommunications Networks'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5588