Going beyond duopoly: Connectivity breakdowns under receiving party pays

- Receiving-party-pays can lead to connectivity breakdowns for strategic reasons.
- This happens in duopoly under discrimination between on-and off-net calls.
- We show that with more than three firms breakdown does not occur for reasonable strengths of call externalities.
- We also predict that in this case firms would coordinate on efficient access charges.
- But bill-and-keep is only efficient if network marginal costs are zero.

We show that the prediction of strategic connectivity breakdowns under a receiving-party-pays system and discrimination between on- and off-net prices does not hold up once more than two mobile networks are considered. Indeed, if there are at least three competing networks and enough utility is obtained from receiving calls, no strategic connectivity breakdowns occur. Private negotiations over access charges then achieve the efficient outcome. Bill & keep (zero access charges) and free outgoing and incoming calls are efficient if and only marginal costs of calls are zero.