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Welfare analysis of regulating mobile termination rates in the UK with an application to the Orange/T-Mobile merger
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Resumo(s)
We present a calibrated model of the UK mobile telephony market with four
mobile networks; calls to and from the fixed network; network-based price discrimination; and call externalities. Our results show that reducing mobile termination
rates broadly in line with the recent European Commission Recommendation to
either pure long-run incremental cost ; reciprocal termination charges with fixed
networks; or Bill & Keep (i.e. zero termination rates), increases social welfare,
consumer surplus and networks profits. Depending on the strength of call externalities, social welfare may increase by as much as £ 990 million to £ 4.5 billion per
year, with Bill & Keep leading to the highest increase in welfare. We also apply
the model to estimate the welfare effects of the 2010 merger between Orange and
T-Mobile under different scenarios concerning MTRs, and predict that consumer
surplus decreases strongly.
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Palavras-chave
Telecommunications Regulation Mobile termination rates Network effects Welfare Calibration