Author(s)
Johan Stennek and Thomas Tangeras
Source
NET Institute Working Paper #08-36, September 2008
Summary
This paper analyzes whether certain economic parameters would foster competion in Europe's telecom sector.
Policy Relevance
This paper studies how to revive competition in an overregulated industry -- a study that is relevant to industries worldwide that suffer from overregulation.
Main Points
- This paper analyzes whether further reductions of network differentiation and switching costs would be enough to create a competitive environment in the European mobile telecommunications sector, allowing the price regulations to be removed.
- A laissez-faire, total government hands-off approach will not be good for competition. A network can sustain its monopoly power by using its access price to raise the rival’s costs for terminating calls inside the own network while simultaneously setting predatory prices on calls terminated in the rival’s network.
- In case competition would still be imperfect, this paper explores additional structural remedies that may be added to restore competition.
- The authors propose a regulatory solution. To generate a competitive environment the following three ingredients are necessary:
- mandatory interconnection,
- reciprocal access prices: and
- rules against setting higher prices for calls to competing networks (off-net calls).
