Mobile Phone Termination Charges with Assymmetric Regulation

We model competition between two unregulated mobile phone companies with price–elastic demand and less than full market coverage. We also assume that there is a regulated full–coverage fixed network. In order to induce stronger competition mobile companies can have an incentive to raise their reciprocal mobile–to–mobile access charges above the marginal costs of termination. Stronger competition leads to an increase of the mobiles ’ market shares, with the advantage that (genuine) net-work effects are strengthened. This ‘collusion ’ is beneficial for everyone, i.e. mobile companies, mobile owners, and those consumers who only have a fixed telephone