Price Structure and Network Externalities in the Telecommunications Industry : Evidence from Sub-Saharan Africa

Price Structure and Network Externalities in the Telecommunications Industry : Evidence from Sub-Saharan Africa

Many developing countries have experienced significant developments in their telecommunications network. Countries in Africa are no exception to this. The paper examines what factor facilitates most network expansion using micro data from 45...

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Bibliographic Details
Main Author:	Iimi, Atsushi
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ADVERTISING BRAND CALLS CAPITAL COSTS CELLULAR PHONE CONSUMER CHOICE CONSUMERS CORRELATION ANALYSIS DECISION MAKING DECISION TREE DEMAND FUNCTION ECONOMIC EFFICIENCY ECONOMIES OF SCALE ELECTRIC POWER EMPIRICAL ANALYSIS ENDOGENOUS VARIABLES EQUILIBRIUM PRICE EXPENDITURE EXTERNALITY FIXED COSTS FIXED COSTS OF PRODUCTION GDP GDP PER CAPITA GROWTH RATE INDEPENDENT REGULATOR INDEPENDENT REGULATORY INFRASTRUCTURE DEVELOPMENT INFRASTRUCTURE SECTORS INFRASTRUCTURE SERVICES MARGINAL COST MARKET PRICES MARKET SHARE MARKET STRUCTURE MOBILE COSTS MOBILE NETWORKS MONOPOLY NATIONAL INCOME NETWORK EXTERNALITIES NETWORK EXTERNALITY PRICE COMPETITION PRICE CONTROL PRICE DISCRIMINATION PRICE LIBERALIZATION PRICE MECHANISMS PRICE REGULATION PRICE SCHEDULE PRICE SCHEDULES PRICE STRUCTURE PRICING MECHANISMS PRICING MODEL PRICING POLICIES PRICING POLICY PRICING SCHEME PRIVATE SECTOR PRIVATIZATION PRODUCTION COSTS PURCHASING RATE DESIGN REGULATORY AGENCIES REGULATORY PRACTICES RETAIL RETAIL PRICES ROADS SUB-SAHARAN AFRICA SUBSCRIBERS SUBSTITUTES SUBSTITUTION SUBSTITUTION EFFECT SUPPLIER SUPPLY EQUATION SURPLUS TELECOMMUNICATIONS TELECOMMUNICATIONS DEVELOPMENT TELECOMMUNICATIONS INFRASTRUCTURE TELECOMMUNICATIONS MARKETS TELECOMMUNICATIONS REFORMS TELECOMMUNICATIONS SERVICES TELECOMMUNICATIONS TECHNOLOGY TELEPHONE COMPANIES TELEPHONE PENETRATION TELEPHONE SERVICE TELEPHONE SERVICES TRAFFIC UNBUNDLING UNIT COST UTILITY FUNCTION WATER SANITATION
Online Access:	http://documents.worldbank.org/curated/en/2007/04/7537662/price-structure-network-externalities-telecommunications-industry-evidence-sub-saharan-africa http://hdl.handle.net/10986/7020

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Summary:	Many developing countries have experienced significant developments in their telecommunications network. Countries in Africa are no exception to this. The paper examines what factor facilitates most network expansion using micro data from 45 fixed-line and mobile telephone operators in 18 African countries. In theory the telecommunications sector has two sector-specific characteristics: network externalities and discriminatory pricing. It finds that many telephone operators in the region use peak and off-peak prices and termination-based price discrimination, but are less likely to rely on strategic fee schedules such as tie-in arrangements. The estimated demand function based on a discreet consumer choice model indicates that termination-based discriminatory pricing can facilitate network expansion. It also shows that the implied price-cost margins are significantly high. Thus, price liberalization could be conducive to development of the telecommunications network led by the private sector. Some countries in Africa are still imposing certain price restrictions. But more important, it remains a policy issue how the authorities should ensure reciprocal access between operators at reasonable cost.

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