Network competition with heterogeneous calling patterns

We show how differences in demand and unbalanced call flows affect considerably the pricing strategies of competing telecommunications networks and this both for competition in linear and nonlinear pricing. Differences in demand give also scope for targeted entry. If networks are close substitutes, we show that an incumbent is able to deter such targeted entry on a customer segment which tends to have a net outflow of calls, though this is harder in nonlinear than in linear pricing.