Date: September 11-12, 2009
Madrid
NEREC (Network for Economic Research on Electronic Communications) aims at bringing together leading economists from university, industry, consultancy and government agencies to discuss recent research contributions of critical importance for European regulation and policymaking in electronic communications.
The scientific committee of the conference was conformed by
Martin Cave (The University of Warwick)
Jorge Padilla (LECG)
Martin Peitz (University of Mannheim and ZEW)
Georges Siotis (UC3M and DG COMP, Commission of the EU)
Eugenio Miravete (University of Texas at Austin)
The conference agenda consisted of the discussion of the first annual report “Monitoring EU Telecoms Policy” and the contributed sessions .
See the Conference Programme
Details for Registration: click here
Venue: Fundación Rafael del Pino
Rafael Calvo 39,
28010, Madrid
Underground: Rubén Darío Station
Venue location
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Abstract
We study how access pricing affects network competition when consumers’ subscription demand is elastic and networks compete with non-linear prices and can use termination-based price discrimination. In the case of a fixed per minute termination charge, our model generalizes the results of Gans and King (2001), Dessein (2003) and Calzada and Valletti (2008). We show that a reduction of the termination charge below cost has two opposing effects: it softens competition and it helps to internalize network externalities. The former reduces consumer surplus while the latter increases it. Firms always prefer termination charge below cost, either to soften competition or to internalize the network effect. The regulator will favor termination below cost only when this boosts market penetration.
Next, we consider the retail benchmarking approach (Jeon and Hurkens, 2008) that determines termination charges as a function of retail prices and show that this approach allows the regulator to increase subscription without distorting call volumes. Furthermore, we show that an informed regulator can even implement the first-best outcome by using this approach.
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A Retail Benchmarking Approach to Efficient Two-Way Access Pricing: Termination-Based Price Discrimination with Elastic Subscription Demand [Download PDF - 248 KiB]