Armstrong, M.; Wright, J.; (2008) Mobile call termination. (ELSE Working Papers 255). ESRC Centre for Economic Learning and Social Evolution: London, UK.

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Abstract

We analyse charges levied by mobile telephone networks to deliver calls. We integrate two literatures: one analysing calls from the fixed network, where predicted unregulated termination charges are too high, and one analysing calls from rival mobile networks, where predicted charges are too low. In practice, however, networks adopt uniform charges for terminating both kinds of traffic, as do regulators. We show how incorporating wholesale arbitrage and demand-side substitution helps reconcile theory with practice. In our framework, the unregulated charge is uniform and typically lies between the efficient and monopoly benchmarks. There remains a rationale for regulation, albeit reduced.

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