Asymmetric Regulation of Mobile Access Charges and Consumer Welfare with Price Regulation

Abstract

Asymmetric regulation as applied to mobile termination rates refers to regulatory arrangements in which different mobile operators charge different termination rates, even though the services provided are essentially identical. The asymmetric regulation has been frequently used as a regulatory tool to support new entrants to a mobile market. This paper examines the economic effects of asymmetric regulation of mobile termination rates using a theoretical model and its simulation. The result shows that when there is no noticeable difference in brand loyalty between mobile operators with the high degree of substitutability between services provided by mobile operators, and the costs of new entrants are low, a reduction in the asymmetry of mobile access prices results in an enhancement of consumer welfare. These findings provide positive evidence for the argument that in certain situations asymmetric pricing of mobile access services may be counterproductive for consumer welfare.

Access Charges Regulation under Asymmetric Mobile Networks

“…As a result, the critical value of the asymmetry parameter is higher than that of the unregulated market because it depends solely on the cost differential. The high-cost firm has a greater tendency to take over the dominant position under symmetric regulation than in the unregulated market 13 , especially when the high-cost firm has a better reputation.…”

“…In that sense, the US and many European countries have used a path towards symmetric access charge regulation (Goral and Karacaer, 2011; Lee, Lee and Jung, 2010). Asymmetric regulation has been replaced by symmetric regulation in countries such as Sweden, Denmark, Poland and Portugal (Lee, Lee and Jung, 2010). However, in some countries, especially in developing countries, there is substantial evidence about network asymmetry, which still plays an important role in market concentration.…”

Analyzing the Economic Effect of Mobile Network Sharing in Korea

“…To implement an MNS system, the parties must link their networks together, which entails cost. This cost includes regulatory costs incurred by the government, including costs related to establishing technical standards and other rules, and costs of mediation between operators [15]. These two types of costs are together defined as the transaction cost of MNS, and the related variation is reflected in the total network cost.…”

The effect of asymmetric regulation on market competition: the case of the 2013 Telecomm Reform in Mexico

“…In addition, we still lack evidence of the causal effects of asymmetric regulations on market structure. Although a large literature has examined the economic effects of asymmetric regulation in the telecommunications sector, most studies have taken a theoretical approach (Peitz 2005, a,b) or a simulation based approach (Lee 2010, Ayala et al 2018). As a result, econometric evidence about the effects of asymmetric regulations on competition in the telecommunications sector is scant.…”