The Welfare Effects of Mobile Termination Rate Regulation in Asymmetric Oligopolies: The Case of Spain

Sjaak Hurkens and Angel L. Lopez

Abstract: This paper examines the effects of mobile termination rate regulation in asymmetric oligopolies. It extends existing models of asymmetric duopoly and symmetric oligopoly where consumer expectations about market shares are passive. First, demand and product differentiation parameters are calibrated using detailed data from the Spanish market from 2010. Next, equilibrium outcomes and welfare effects under alternative scenarios of future termination rates are predicted. Lowering termination rates typically lowers profits of all networks and improves consumer and total surplus.

Keywords: Mobile termination rates; Network effects; Simulations; Telecommunications; Welfare

Telecommunications Policy 36:369-381 (2012)