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Gual, Jordi --- "Market definition in the telecoms industry" [2004] ELECD 50; in Buigues, A. Pierre; Rey, Patrick (eds), "The Economics of Antitrust and Regulation in Telecommunications" (Edward Elgar Publishing, 2004)

Book Title: The Economics of Antitrust and Regulation in Telecommunications

Editor(s): Buigues, A. Pierre; Rey, Patrick

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843765103

Section: Chapter 4

Section Title: Market definition in the telecoms industry

Author(s): Gual, Jordi

Number of pages: 26

Extract:

4. Market definition in the telecoms industry
Jordi Gual

1. INTRODUCTION
Market definition for antitrust purposes is by now firmly rooted in economic analysis both in
the USA and the EU, even if the approaches are slightly different. This chapter examines the
theoretical basis for the legal definitions and assesses whether the general principles need to
be adapted when dealing with the telecommunications services industry.
The chapter finds that the conventional antitrust methodology for market definition can
be, to a large extent, readily applied to the telecoms industry but points out some key
adjustments that have to be made to this methodology to ensure that the antitrust and
regulatory authorities end up defining markets which capture adequately the nature of the
competitive interaction in this industry.
Three adjustments are needed. First, careful consideration should be given not only to
demand substitutabilities, but also to the competitive interaction with all potential suppliers.
Second, demand complementarities and the economies of joint production should be prop-
erly recognized since they imply that in this industry bundles or systems of services may
become a significant unit of antitrust and regulatory analysis. Third, market definition
should take into account that the telecoms service industry is characterized by fixed and
continuous sunk costs of service provision, and that this will often imply the need to revise
the conventional concepts of market power and substitutability based on price elasticities.
The chapter also argues that if some competitive problems are detected with particular
services (for example mobile call ...