Abstract
The concept of a two-sided market has received increased attention in the academic literature of late. In this paper we argue that the market for call termination is an example of a two-sided market. We apply the concepts of a two-sided termination market to the current attempts by ICASA to reduce mobile termination rates through regulation. We also deal with the concepts of significant market power (SMP) and established significant market power (ESMP), and show that the traditional thinking around market power has to be adapted when one deals with two-sided markets. More specifically, we analyse these concepts by looking at the position of Cell C, a smaller player in the mobile market in SA. We show that market power (and appropriate pro-competitive remedies) in call termination markets cannot be established without considering the origination (retail) market – the other side of the two-sided market.
Highlights
The concept of a two-sided market has received increased attention in the academic literature of late
We argue that the economic concepts of relevant markets and market power have to be adapted in the case of two-sided markets
We show that in two-sided markets where the price structure is more important than the actual price level, one cannot use the usual indicators to assess whether market power exists
Summary
The concept of a two-sided market has received increased attention in the academic literature of late. It appears that some consensus has emerged on the main features of such markets, but the implications for regulation are not well understood. We apply the concepts of a two-sided termination market to the current attempts by ICASA to reduce mobile termination rates through regulation. We deal with the concepts of significant market power (SMP) and established significant market power (ESMP), and show that the traditional thinking around market power has to be adapted when one deals with two-sided markets. We show that market power (and appropriate pro-competitive remedies) in call termination markets cannot be established without considering the origination (retail) market – the other side of the two-sided market
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