Two-sided markets: An application to mobile termination in South Africa

Abstract

The concept of a two-sided market has received increased attention in the academic literature of late. In this paper we argue that the market for call termination is an example of a two-sided market. We apply the concepts of a two-sided termination market to the current attempts by ICASA to reduce mobile termination rates through regulation. We also deal with the concepts of significant market power (SMP) and established significant market power (ESMP), and show that the traditional thinking around market power has to be adapted when one deals with two-sided markets. More specifically, we analyse these concepts by looking at the position of Cell C, a smaller player in the mobile market in SA. We show that market power (and appropriate pro-competitive remedies) in call termination markets cannot be established without considering the origination (retail) market – the other side of the two-sided market.