What is the mobile termination regime for the asymmetric firms with a calling club effect?

Abstract

The aim of our paper is to determine the efficiency of the asymmetric regulation of the Mobile Termination Rates (MTRs) in a market where the firms are differentiated in size and with commercial offers that include calling club effects. Major regulatory issues are related to these analyses, since some European National Regulatory Authorities (NRAs) and the European Commission tend to question asymmetric regulation mechanisms. Based on a model designed to determine firm profits and consumer surplus, our main results are as follows: the asymmetric regulation of the MTRs may contribute to an increase in welfare. If the impact is neutral regarding the firms (a simple reallocation of profits from the large to the small player), the consumer surplus is increased; the appropriate way to proceed is to decrease the large firm's MTRs rather than increasing the smaller firm's ones, which could produce negative side effects; from a dynamic point of view, the appropriate asymmetric regulation may contribute to balancing market shares and, in such a way, compensate for first-mover advantages.