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    Mobile Network Competition, Customer Ignorance and Fixed-to-Mobile Call Prices

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    Mobile Network Competition, Customer Ignorance and Fixed-to-Mobile Call Prices (210.8Kb)

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    Author
    Gans, Joshua S.; King, Stephen P.
    Date
    2000-02
    University of Melbourne Author/s
    GANS, JOSHUA; King, Stephen
    Affiliation
    Economics and Commerce: Department of Economics
    Metadata
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    Document Type
    Preprint
    Citations
    Gans, Joshua S. and King, Stephen P. (2000) Mobile Network Competition, Customer Ignorance and Fixed-to-Mobile Call Prices.
    Access Status
    Open Access
    URI
    http://hdl.handle.net/11343/33664
    Abstract
    This paper examines the influence of mobile network competition on the prices of fixed-to-mobile calls. Because fixed line customers cannot, in general, distinguish the identity of a specific mobile network, these networks have market power when setting termination charges for calls from fixed lines. We show that: (1) unregulated mobile termination charges will result in higher than monopoly call prices; (2) the regulation of termination charges and prices downward will affect mobile subscription rates and may lower these rates; and (3) regulation of any mobile carrier's termination charges can reduce fixed to mobile prices but will result in an increase in unregulated carriers' termination charges. When fixed line consumers can distinguish between the different mobile networks they are calling, fixed to mobile call prices will fall relative to their level under customer ignorance. Direct mobile charging for termination also exerts downward pressure on the total fixed to mobile call price. A low cost method of lowering fixed to mobile charges would be to facilitate the identification of carriers by consumers and to restructure billing so that mobile networks are able to directly charge fixed line consumers for termination services
    Keywords
    Journal of Economic Literature Classification Numbers: L41; L96; mobile network competition; termination charges; interconnect fees; price regulation and customer ignorance

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