8 February 2010: "Network-Based Price Discrimination and Bill and Keep vs. Cost-Based Regulation of Mobile Termination Rates" by David Harbord and Marco Pagnozzi to appear in Review of Network Economics.
The article by David Harbord and Marco Pagnozzi, "Network-Based Price Discrimination and Bill and Keep vs. Cost-Based Regulation of Mobile Termination Rates" will appear in the Review of Network Economics in March 2010. The paper surveys the recent literature on competition between mobile networks in the presence of call externalities and network effects. It argues that the regulation of mobile termination rates based on fully allocated costs exacerbates the network effects associated with tariff-mediated network externalities, by increasing mobile networks' on-net/off-net price differentials. This reduces welfare and acts as barrier to growth for smaller networks and new entrants. The paper argues for the adoption of bill-and-keep for mobile termination rates, and responds to recent theoretical arguments which suggest that such a move might harm mobile subscribers.
It can be downloaded from the Topical Articles section of our website, or from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1540502.