Evaluating a Decade of Mobile Termination Rate Regulation

Genakos Christos Valletti Tommaso M.
CEIS Research Paper
We re-consider the impact that regulation of call termination on mobile phones has had on mobile customers’ bills. Using a large panel covering 27 countries, we find that the “waterbed” phenomenon, initially observed until early 2006, has disappeared over the 10-year period, 2002-2011. We argue that this is due to the changing nature of the industry, whereby mobile-to-mobile traffic now plays a much bigger role compared to fixed-to-mobile calls in earlier periods. This implies that regulation does not have unintended consequences anymore. Over the same decade, there is no evidence that regulation caused a reduction in mobile operators’ profits and investments.
Number: 303
Keywords: regulation, telephony, termination rates, waterbed effect
JEL codes: L4, L9
Volume: 12
Issue: 01
Date: Friday, January 10, 2014
Revision Date: Friday, January 10, 2014