Evaluating a Decade of Mobile Termination Rate Regulation

We re‐consider the impact that regulation of call termination on mobile phones has had on mobile customers’ bills. Using a large panel covering 27 countries, we find that the ‘waterbed’ phenomenon, initially observed until early 2006, becomes insignificant on average over the 10‐year period, 2002–11. We argue that this is related to the changing nature of the industry, whereby mobile‐to‐mobile traffic now plays a much bigger role compared to fixed‐to‐mobile calls in earlier periods. Over the same decade, we find no evidence that regulation caused a reduction in mobile operators’ profits and investments.