termination rates which we use for the analysis.
Information about the alternative regulation schemes is taken from the Plaut Economics
Regulatory Index for the years 2000 until 2006 and complemented for 2007 with data
from national regulators’ websites. The Plaut index is based on a questionnaire for EU
member states. We selected the questions concerning mobile interconnection regulation
and transformed the disaggregated values for each country and each year into dummy-
variables for alternative regulation mechanisms and asymmetric regulation taking into
account country information provided on the regulators’ websites. We complemented
the information also for Norway and Switzerland since they are not EU member states
and, thus, are not covered by the index.
The transmission technology is a main driver of per-unit costs. In Europe mainly two
frequency bands are allowed for mobile communication which are a frequency band
around 900 MHz and a frequency band around 1800 MHz. Information about the li-
censes of each MNP for the two frequency bands is taken from the GSMA website
(www.gsmworld.com). GSMA is the worldwide association of mobile companies. On
the website an overview of licenses for transmission technologies is offered including in-
formation about the year of the grant of a license. It is necessary to distinguish between
the two frequency bands as the transmission in the higher-frequency band leads to higher
transmission costs. This should be reflected in the per-unit costs and thus also in the
termination rates.
In network-based markets customer concentration is a key driver of costs as in more
densely populated areas since the infrastructure could be installed at lower costs. With
mobile infrastructure two ambiguous effects might exist as country coverage has been
one of the key issues from the political perspective. Companies were forced to build up
a network infrastructure which not only covers most of the population but also most of
the area. On the other hand, in more densely populated areas, where the population
coverage is expected to be easier, congestion is an issue. This is the case since commu-
nication of more customers in one cell around a transmission tower reduces the speed of
transmission, thus, impairing the communication quality. We use data for population
concentration from the OECD since standard density measures assume a uniform dis-
tribution of the population.
We know from the note on data challenges in the Merrill Lynch report that off-net min-
utes are double-counted. With the assumption that traffic is market share-dependent
we know the following relation between the Merrill Lynch data and the actual values:
M\OUi = si MOUj + MOUi (30)
j
where M\OU i are the MOUs of MNP i as given in the Merrill Lynch report and MOUi
are the unobserved (actual) MOUs of MNP i. Rewriting this term in matrix notation to
get the relation of the given MOUs and the corrected MOUs for all providers we achieve
37