Asymmetric Regulation of Mobile Access Charges and Consumer Welfare with Price Regulation

Abstract

Asymmetric regulation as applied to mobile termination rates refers to regulatory arrangements in which different mobile operators charge different termination rates, even though the services provided are essentially identical. The asymmetric regulation has been frequently used as a regulatory tool to support new entrants to a mobile market. This paper examines the economic effects of asymmetric regulation of mobile termination rates using a theoretical model and its simulation. The result shows that when there is no noticeable difference in brand loyalty between mobile operators with the high degree of substitutability between services provided by mobile operators, and the costs of new entrants are low, a reduction in the asymmetry of mobile access prices results in an enhancement of consumer welfare. These findings provide positive evidence for the argument that in certain situations asymmetric pricing of mobile access services may be counterproductive for consumer welfare.