Can evidence of pricing power help market power assessment? Broadband Internet in Ireland and the Netherlands

This article proposes a simple hedonic price test to assess whether firms may have pricing power. The test allows NRAs to compare prices of providers of differentiated products on a like-for-like basis. Testing for pricing power could be a useful complement to market share analysis. This is especially the case in market reviews periodically undertaken by European communications regulators. As an illustration the test was applied to broadband Internet access services in Ireland and the Netherlands. Results appear encouraging as they are broadly aligned to the decisions of the regulatory authorities in both countries that the incumbent DSL operators had market power at the time.

► A pricing power test, whether a provider may price above its competitors, is proposed.
► European telecoms NRAs' market power assessments currently mainly rely on market shares.
► The test could be a useful complement to the current European telecoms NRAs' approach.
► The test is applied to retail broadband markets in the Netherlands and Ireland.
► The findings are broadly aligned with the Dutch and Irish NRAs' conclusions.