اثرات جانبی شبکه و تعرفه دو قسمتی در بازار مخابراتی

This article analyzes demand side particularities of telecommunications markets and their consequences for the market structure. I assume that telecommunications markets are characterized by two distinguishing features: (i) the efficacy of network externalities and (ii) the presence of two-part tariffs as a simple instrument of price discrimination. Then, the usual tendency to conformity established by network externalities may in some sense be overcome by sufficient differentiation in price structures. In contrast to the perception that deregulated telecommunication markets exhibit a genuinely higher degree of competition, this article points to the observation that discrimination may retain monopoly power to network suppliers by introducing more product differentiation. Various regulation patterns and pricing rules are analyzed with respect to their influence on competition and market structure.

The telecommunications industry is without doubt a key industry of the future. Driven by liberalization, globalization and the rapid pace of innovations such as the Fax, various generations of mobile phones, fiber optic cables and Internet telephony this industry has already transformed the way people live and work in the last decade. It is not difficult to presume that a further evolution in the way of using these products and their successors will change our present world further. In her book The Death of Distance, Frances Cairncross (1997) points out the immense changes that are to come by a dramatic cut in the cost of long distance telephone calls and data transfer. She portrays a world with virtual offices where ever more people can live and work in different regions or even countries. This prophecy suggests that, possibly, another shift of globalization with all its economic consequences may be expected in the future. In the present article I follow the view that some typical characteristics of telecommunications markets will survive or even be reinforced, albeit with a colossal innovative change in others. First is the presence of network externalities in consumer purchasing decisions. The size of a network matters, since a customer has only direct access to members of the same network. Interconnection to other networks, while technically feasible, is often more expensive since the operator of another network can raise ‘access charges’. Currently, this tends to be the case between local and long distance networks in the same country, between networks of different countries, between a mobile phone network and a fixed wire network or between different cellular networks. Moreover, for mobile telephone customers the value of a handset depends on space coverage and sound quality, which, in turn, can depend on the size of the network. Another typical feature of telecommunication services is non-linear prices. These will survive in more competitive telecommunications markets since telephony is one of the most highly personalized type of goods, identifying individuals with (telephone) numbers. This property naturally invites suppliers to take advantage of various sorts of discrimination such as, for example, with respect to quantity, location or time. In this article, I investigate two specifications of demand structures, telecommunication characteristic network externalities and two-part tariffs. In 2 and 3, I assume ‘exogenous network externalities’, i.e. the size of the network appears in the utility functions of heterogeneous consumers. In 4 and 5, a larger network, rather than being preferred exogenously, can turn out to be cheaper as a consequence of access charges being raised by network operators. My results are the following. In Section 2, I show that the presence of a network externality establishes a strong force towards conformity (all consumers tend to choose the same network) as long as price structures (two-part tariffs) are ‘too similar’. However, this tendency towards conformity is alleviated by the possibility of differentiation in price structures. The differentiation is related to consumer heterogeneity with respect to their demand. In particular, network operators are able to separate high-demand consumers (business consumers) from low-demand consumers (private households) by charging high entry fees and low per unit prices or a lower entry fee and higher per unit price. Different pricing regimes can coexist (between network operators or within the same network) and create additional opportunity to gain monopoly power over specific consumers. Section 3 investigates the corresponding pricing and entry behavior of network suppliers. As long as the fixed costs of entry are high, an incumbent can easily preempt entry. The incumbent simply chooses a tariff structure that makes entry unprofitable for any potential entrant. The large installed customer base in combination with network externalities helps as an additional shield of protection. This may change for low fixed costs of entry (think, for example, of ‘call-by-call’ or ‘callback’ companies). In this latter case the pricing behavior is unstable in the entry event. If we accept volatile pricing and market shares as indicators for such instability, this model is consistent with observations in the early phases of market liberalization (as currently in Germany in both the fixed wire and the mobile phone markets). In Section 4 the aggregated demand structure is derived for the case of two network operators charging two-part tariffs in the absence of intrinsic network externalities. It is shown in Lemma 2 that for simple Cobb–Douglas utility functions the endogenous market shares are solutions of transcendental functions and therefore cannot be represented in closed form. Consequently, in Section 5, I continue by investigating several types of pricing rules numerically. The resulting endogenous network externality in the form of access charges turns out to be a powerful tool for an incumbent to protect his market against entrants.1 One can conclude that, even without exogenous network externalities, there is still a strong necessity for regulatory intervention as long as network competition is socially desired. The numerical examples illuminate the demand structure for several typical regulatory rules, for example if access charges have to be reciprocal or are capped. In the literature there has been little systematic and rigorous economic analysis on the demand side of telecommunication markets. The existing theoretical literature, such as, for example, Laffont et al., 1998a and Laffont et al., 1998b, Armstrong (1998) and Dessein (2000), follows the IO tradition and concentrates on the incentives and the behavior of suppliers. In these articles the demand side is set up as a simple Hotelling-type model with one network supplier at each end of the unit interval of differentiated consumers. This framework is convenient since it generates market shares depending continuously on price structures. However, as some authors recognize, the implicit assumption that consumers are exogenously attached to a particular network is not only unrealistic but effectively assumes away some typical features of network externalities such as the tendency to corner solutions and multiple equilibria. In this article, some of the problems related to network externalities are handled by applying concepts of the theory of anonymous games developed in Blonski, 1999 and Blonski, 2000. The results for anonymous games turn out to be helpful in revealing the corresponding equilibrium pattern of discontinuous demand related to network externalities.

Numerical analysis or specific models, unlike general results, are not able to generate positive insights. However, examples such as the present models canserve the purpose of raising attention to a problem. In this context the problem deals with the particularities of the demand side in telecommunication markets. In summary, the insight beyond the specific formulation of the demand structure of telecommunication markets is the following. Whenever network externalities and non-linear pricing are important features for a market, classic insights on market structure and its comparative statics have to be modified significantly. Network externalities represent a force towards uniformity and therefore towards monopoly. In contrast, the possibility of discrimination between heterogeneous customers (two-part tariffs are only one example) points to extensive product differentiation. However, some observations in this article confirm known results such as, for example, the necessity of regulating access charges or the instability of equilib- rium price behavior. These results appear to be more robust against various specifications of consumer behavior and therefore deserve the attention of practitioners and researchers