Discussion Papers

Hasan Alkas

Preisbündelung auf Telekommunikationsmärkten aus regulierungsökonomischer Sicht
Nr. 219 / April 2001

Summary

In this study price bundling in the telecommunications market will be analysed, in order to assess their welfare-economic and competition-political pro and cons as well as to develop criteria for their regulatory evaluation. Price bundling in this context refers to a situation, where the sum of the separate prices of the services included in the bundle is higher than that of the bundle itself. The customer receives a price advantage if he selects the bundled offer.

Multiproduct firms of telecommunication services offer increasingly service bundles in connection with different tariff options, such as flat-rates or two-part tariffs. For strategic reasons enterprises have an incentive to bundle services, even if they supply the services also individually. Price bundling can extract consumer surplus of heterogeneous customers more effectively than separate pricing and thereby increase profits and reduce churn-rates. Therefore companies compare in selling their services unbundled sales to pure bundling, where only the complete bundle is offered and mixed bundling, where both the complete bundle as well as the goods are sold separately.

Important is the price advantage for the customer, who select the bundle. Such a price structure leads to the situation that customers prefer rather the bundle, as its separate components even when the services are also offered separately. Particularly since a bundle of services in a one-stop-shop lowers also the transaction costs of the customers. These price advantages influences the substitution movements of the customers. This can be analysed by measuring the response of customers to price movements. However, the price advantage of the bundle can prevent that customers move to competitors.

From a welfare economic standpoint price bundling might be advantageous, if it can increase the quantity in demand. Especially mixed bundling opens the possibility for customers to select the best tariff. However, from a competition policy view price bundling can be problematic. Bundling or in some extreme cases tying several services together, means that competitors offering only parts of the bundle, those who do not have the complete product range, are not able to survive against multiproduct firms. Under some circumstances price bundling creates a strategic market entry barrier.

The possibility of bundling and the control of the essential infrastructure provides multiproduct firms a strategic advantage. Especially dominant multiproduct firms can leverage their market power from markets without competition to the competitive market to influence competitors. A extreme case is, if the bundle includes services from market segments, where the multiproduct firm has a quasi-monopoly. Leveraging can take place also under evasion of the different regulatory intensities in the respective markets. In this context regulation with special attention to price discrimination, predatory pricing, price squeezing and cross subsidisation is relevant.

Only German language version available.

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