Welfare Analysis of Regulating Mobile Termination Rates in the  U . K . | Zendy

Harbord David | Zendy; Hoernig Steffen | Zendy

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Welfare Analysis of Regulating Mobile Termination Rates in the U . K .

Author(s) -

Harbord David,

Hoernig Steffen

Publication year - 2015

Publication title -

the journal of industrial economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.93

H-Index - 77

eISSN - 1467-6451

pISSN - 0022-1821

DOI - 10.1111/joie.12084

Subject(s) - economic surplus , welfare , externality , network effect , mobile telephony , social welfare , advertising , market share , economics , business , microeconomics , telecommunications , computer science , marketing , mobile radio , market economy , political science , law

We develop a calibrated simulation model of the U . K . mobile telephony market and use it to analyze the effects of reducing mobile termination rates ( MTR 's) as recommended by the E uropean C ommission. We find that reducing MTR 's is likely to increase both consumer surplus and networks' profits. Depending on the strength of call externalities (i.e., benefits to the recipient of a call), social welfare may increase by as much as £1 billion to £4.6 billion per year. We also use the model to estimate the welfare effects of the 2010 merger between O range and T ‐ M obile and find that the merger led to a substantial reduction in consumer surplus.

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