The Ban of Off-Net/On-Net Price Discrimination in Chile†

Abstract

Chilean antitrust authorities banned termination-based price discrimination in mobile calls in 2012. This paper discusses the antitrust process that led to this prohibition and analyzes its merits. We characterize the discriminatory plans that the largest mobile company in Chile—Movistar—offered in 2010, when the legal dispute began, calibrate a competition model for the Chilean market—both for pre- and post-paid customers—and compare the observed price differentials with those which are justifiable on competitive grounds. The main result is that in most plans, efficiency and strategic reasons could explain the observed differential only for large call externality parameter values. We also discuss Competition Court rulings in the context of several other changes that affected the mobile telephony market in Chile and report the evolution of several key market indicators after the ban was introduced.