Competition and Price Dispersion in International Long Distance Calling

TL;DR

This paper investigates how changes in provider concentration affect international long distance calling prices, revealing that increased competition can lead to lower prices for some plans but higher prices for others, thus increasing price dispersion.

Contribution

It provides new insights into the complex relationship between market concentration, competition, and pricing strategies in international telecommunications.

Findings

Decreased concentration correlates with lower consumer prices.

More competition lowers prices for flagship plans.

Increased competition raises prices for basic plans.

Abstract

This paper examines the relationship between changes in telecommunications provider concentration on international long distance routes and changes in prices on those routes. Overall, decreased concentration is associated with significantly lower prices to consumers of long distance services. However, the relationship between concentration and price varies according to the type of long distance plan considered. For the international flagship plans frequently selected by more price-conscious consumers of international long distance, increased competition on a route is associated with lower prices. In contrast, for the basic international plans that are the default selection for consumers, increased competition on a route is actually associated with higher prices. Thus, somewhat surprisingly, price dispersion appears to increase as competition increases.