DP9361 Fixed-Mobile Integration

Author(s): Marc Bourreau, Carlo Cambini, Steffen Hoernig
Publication Date: February 2013
Keyword(s): Call externality, Integration, Network competition, On/off-net pricing
JEL(s): L51, L92
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9361

Often, fixed-line incumbents also own the largest mobile network. We consider the effect of this joint ownership on market outcomes. Our model predicts that while fixed-to-mobile call prices to the integrated mobile network are more efficient than under separation, those to rival mobile networks are distorted upwards, amplifying any incumbency advantage. As concerns potential remedies, a uniform off-net pricing constraint leads to higher welfare than functional separation and even allows to maintain some of the efficiency gains.