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Fixed-Mobile Integration

 |  May 24, 2013

Posted by D. Daniel Sokol

Steffen Hoernig (Nova School of Business and Economics, Lisbon, Portugal), Marc Bourreau (Telecom ParisTech, Department of Economics and Social Sciences), and Carlo Cambini (Politecnico di Torino, DIGEP) analyze Fixed-Mobile Integration

ABSTRACT: Often, fixed-line incumbents also own the largest mobile network. We consider the effect of this joint ownership on market outcomes. Our model predicts that while fixed-to-mobile call prices to the integrated mobile network are more efficient than under separation, those to rival mobile networks are distorted upwards, amplifying any incumbency advantage. As concerns potential remedies, a uniform off-net pricing constraint leads to higher welfare than functional separation and even allows to maintain some of the efficiency gains.