The relation of traffic balance and network size: a case from the indian mobile industry

Abstract

Do small telecom networks face an inherent disadvantage vis-a-vis large networks in the matter of interconnection? Does the net payout for interconnection decrease with an increase in the relative size of the network? While the assumption of a balanced calling pattern implies equal traffic flows across any two networks, the relation between network size and net payout for interconnection is an empirical question that depends on the customer profiles, pricing strategies, and calling patterns of different networks at a particular point in time, in a specific context. With the help of data on monthly intracircle, inter-operator traffic flows in India between a sample operator and all other operators, the paper presents a case study showing that a high relative subscriber balance is associated with high incoming call minutes. Company- and market-specific fixed effects account for the bulk of the explanatory power. There is some evidence that, ceteris paribus, an increase in unutilised capacity leads to an increase in the number of outgoing minutes, and in the net payout for interconnection.