Techreport,
Cellular Mobile Pricing Structures and Trends
Report, Directorate for Science, Technology and Industry, Committee for Information, Computer and Communication Policy, Working Party on the Information Economy and Information Services Policies, OECD, Paris, (2000)
Abstract
Analysis clearly shows a strong correlation between market growth and market openness. During the 1990s, those markets that had liberalised the most, and had four or more operators, have consistently outperformed markets with monopolies, duopolies or three operators. In the United States, for example, some markets have seven networks in direct competition. In Japan, Korea and the Netherlands up to five operators are competing in the same markets. This is important in relation to third generation mobile licensing where policy makers should strive to open markets as rapidly and as widely as possible to this new technology.
Important price reductions have taken place in mobile services. However, there is evidence that in many countries prices remain high and there is still scope for price reductions. If growth slows and operators start competing against each other for existing customers, more rapid price declines can be expected. However, there has been an insufficient price reduction in the pricing of calls from fixed-to-mobile networks in countries with calling party pays. The lack of competition in this price segment is due largely to the market power of mobile companies. Prices in this market segment appear to be well above cost and should be reviewed by regulators who should require cost-based pricing.
The relatively high termination charges on mobile networks are leading to bypass at the national level via fixed network and international re-routing of traffic. This has led to recommendations to seek increases in international termination charges to prevent such bypass. Such action would not rectify the root of the problem, which is based on high mobile termination charges.
Prices for international roaming appear to bear little relation to cost. This reflects insufficient competition in the roaming market to a large extent due to the relative small size of the international roaming market.
Successful growth and diffusion of mobile communication services is focusing greater attention on how mobile relates to fixed networks. Accordingly, it is necessary for regulatory authorities to review current frameworks in those instances where regulation might impede the offering of certain pricing structures, such as calling party pays. This issue is critical in putting fixed and mobile networks on an equal footing, so the potential for competition between networks can be exploited. Testing the demand for new pricing structures can be left to the market.
Successful growth and diffusion of mobile communication services is focusing greater attention on how mobile communication relates to the Internet and electronic commerce. This report reviews and benchmarks the pricing of emerging services such as short message services. These services are the harbingers of `third generation' information services over mobile networks, and policy makers need to review current regulatory frameworks to enhance pricing innovation and competition in the provision of these services.
