Tuesday, December 16, 2008
The Effectiveness of Mobile Wireless Service as a Competitive Constraint on Landline Pricing: Was the DOJ Wrong?
Posted by D. Daniel Sokol
ABSTRACT: The US Department of Justice (DOJ) recently concluded that "the available evidence does not establish that mobile services currently represent an effective competitive constraint on landline access pricing." However, two NERA experts -- Dr. William E. Taylor, Senior Vice President and Communications Group Head, and Dr. Harold Ware, Vice President -- disagree with this conclusion. In this paper, Dr. Taylor and Dr. Ware argue that data on price trends and substitution of wireless for landline services clearly demonstrate that mobile services represent an effective competitive constraint on landline pricing. The authors contend that for some (perhaps many) customers, an increase in wireline prices will cause them to shift to wireless services exclusively. Thus any competitive analysis of wireline access service must take wireless services into account -- as wireline carriers obviously do -- together with cable and VoIP competitors.