Optimal mobile termination rate: The Brazilian mobile market case

• Computation of the optimal mobile termination rate under several criteria.
• Estimation of the price elasticity of the mobile telephony demand in Brazil.
• Impacts of price differentiation in on-net and off-net calls.
• Effects of charging the mobile termination rate among mobile networks.

This paper presents a study of the impacts of changes in the mobile termination rate in Brazil using 2008 as the base year. For this we use an extension of the monopolistic competition model used by Wright, Thompson, and Renard (2007) allowing for the charge of interconnection fee also from calls originating on mobile networks and differentiated prices for on-net and off-net calls. After calibration of the model parameters and estimation of the price elasticity of demand for mobile services, we conduct a comparative static analysis varying the mobile termination rate in order to find the optimal value for that parameter. Finally, we provide some discussions on policy regulation in that sector depending on the objective of the regulator agency.