Asymmetry of mobile termination rates and the waterbed effect

Jongyong Lee (Electronics and Telecommunications Research Institute) and Duk Hee Lee (Korea Advanced Institute of Science and Technology) Asymmetry of mobile termination rates and the waterbed effect.

ABSTRACT: This paper empirically analyzes the relationship between asymmetric regulation on mobile termination rates and mobile retail prices, using panel data collected from 20 OECD member countries for 22 quarters. In addition to the asymmetry of mobile access charges, the authors also focus on the impact of a number of variables, such as churn rates, mobile penetration rates, and the market concentration index on mobile operators’ retail prices. The results reveal that pricing asymmetry in access services has a positive correlation with mobile retail prices. Therefore, this study supports the assumption that the waterbed effect between the asymmetry of mobile termination rates and retail prices may occur.