Welfare Analysis of Regulating Mobile Termination Rates in the UK (With an Application to the Orange/T-Mobile Merger)

Download Now Date Added: Mar 2010
Format: PDF

This paper presents results from a calibrated welfare model of the UK mobile telephony market which includes many mobile networks; calls to and from the fixed network; network-based price discrimination; and call externalities. The analysis focuses on the short-run effects of adopting lower Mobile Termination Rates (MTRs) on total welfare, consumer surplus and profits. The authors' simulations show that reducing MTRs broadly in line with the recent European Commission Recommendation to either "Long-run incremental cost"; reciprocal termination charges with fixed networks; or "Bill-and-keep" (i.e. zero termination rates), increases social welfare, consumer surplus and networks' profits.