Demand-side Spillovers and Semi-collusion in the Mobile Communications Market

Authors: Foros Ø.¹; Hansen B.²; Sand J.Y.³

Source: Journal of Industry, Competition and Trade, Volume 2, Number 3, September 2002 , pp. 259-278(20)

Publisher: Springer

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Abstract:

We analyze roaming policy in the market for mobile telecommunications. Firms undertake quality improving investments in network infrastructure in order to increase geographical coverage, capacity in a given area, or functionality. Prior to investments, roaming policy is determined. We show that under collusion at the investment stage, firms’ and a benevolent welfare maximizing regulator’s interests coincide, and no regulatory intervention is needed. When investments are undertaken non-cooperatively, firms’ and the regulator’s interests do not coincide. Contrary to what seems to be the regulator’s concern, firms would decide on a higher roaming quality than the regulator. The effects of allowing a virtual operator to enter are also examined. Furthermore, we discuss some implications for competition policy with regard to network infrastructure investment.

Keywords: mobile communications; roaming; competition; virtual operators

Language: English

Document Type: Research article

Affiliations: 1: Norwegian School of Economics and Business Administration (NHH), Depatment of Economics, Hellev. 30, N-5045 Bergen, Norway oystein.foros@nhh.no 2: Telenor Research & Development, N-1331 Fornebu, Norway bjorn.hansen@telenor.com 3: University of Tromso, Department of Economics and Management, NFH, N-9037 Tromso, Norway jan.sand@nfh.uit.no

Publication date: 2002-09-01