DP6073 Competition vs. Regulation in Mobile Telecommunications
|Author(s):||Johan Stennek, Thomas P. Tangerås|
|Publication Date:||February 2007|
|Keyword(s):||access price competition, entry, network competition, network substitutability, regulation, two-way access|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=6073|
This paper questions whether competition can replace sector-specific regulation of mobile telecommunications. We show that the monopolistic outcome prevails independently of market concentration when access prices are determined in bilateral negotiations. A light-handed regulatory policy can induce effective competition. Call prices are close to the marginal cost if the networks are sufficiently close substitutes. Neither demand nor cost information is required. A unique and symmetric call price equilibrium exists under symmetric access prices, provided that call demand is sufficiently inelastic. Existence encompasses the case of many networks and high network substitutability.