Mobile call termination revisited
Wilfred Sand-Zantman (University of Toulouse 1)
Riccardo Faini CEIS Seminars
Friday, November 12, 2010 h. 12:00-14:00
We propose an explanation of the reluctance of mobile operators to move toward low levels of mobile to mobile (MTM) termination rates, that is based on the heterogeneity of calling patterns and demand elasticities among users of the service. We show that when the elasticity of participation and the intensity of usage are negatively correlated, the following conclusions hold: i) The prot maximizing MTM reciprocal termination rate is above the marginal termination cost; ii) The welfare maximizing termination rate is also above cost, but below the former. We extend the analysis to on-net / o-net pricing, and also discuss the impact of xed to mobile termination.