Analysis of duopoly price competition between WLAN providers

Proceedings of the IEEE International Conference on Communications, 2009, p. 1-5With the rapid development of wireless Internet services, several WLAN service providers may coexist in one public hotspot to compete for the same group of customers, leading to an inevitable price competition. The charged price and the provisioned packet loss at each provider are major factors in determining users' demands and behaviors, which in turn will affect providers' revenue and social welfare. In this paper, we set up a novel game model to analyze a duopoly price competition. We first show the users' demands are distributed between providers according to a Wardrop Equilibrium and then prove the existence of a Nash equilibrium on providers' charged prices. Through analysis, we further find that in Nash equilibrium state the social welfare is very close to its maximal value in cooperative situation. Furthermore, the providers' aggregate revenues also do not decrease when the users have high sensitivity about the charged prices. Thus the competitive duopoly WLAN market can still run in an efficient way even in the absence of complex regulation schemes. ©2009 IEEE.published_or_final_versio

Section 10 Forbearance: Asking the Right Questions to Get the Right Answers

The Telecommunications Act of 1996 aimed to “provide for a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans….” Key to the Federal Communication Commission’s ability to satisfy this deregulatory mandate is Section 10 of the 1996 Act which provides the agency with express legal authority to forbear from enforcing certain portions of the Communications Act. In this paper, we use the agency’s Phoenix Forbearance Order as a template for outlining how the Commission can improve its forbearance analysis. Our analysis focuses on forbearance from the unbundling provisions in the 1996 Act, but we also show how the Phoenix Forbearance Order is relevant to the net neutrality debate. In particular, the Phoenix Forbearance Order rejects the validity of forbearance in the presence of either monopoly or duopolistic competition. Given the Commission’s finding that Broadband Service Providers are “terminating monopolists,” forbearance cannot be used to create what is colloquially referred to as “Title II Lite.” In fact, if the retail broadband service is classified as a Title II service, then the Commission’s stance on broadband competition and the Phoenix Forbearance Order’s conclusions on duopolistic competition likely requires, for the first time, the price regulation of all retail broadband connections

Network competition : empirical evidence on mobile termination rates and profitability

We analyze a model of multi firm competition between mobile network operators. The model assumes inelastic usage demand and full penetration, and allows for asymmetric termination rates, differences in marginal costs and vertical differentiation. A key property is that operators’ equilibrium profit is unaffected by an identical change in all termination rates in the market - we call this the profit neutrality hypothesis. The model is well suited for econometric implementation. We use a panel data set comprising north western European mobile operators to estimate equilibrium profit functions and find that we cannot reject the profit neutrality hypothesis. The results suggest that a reduction in mobile termination rate levels in mature markets will not necessarily benefit consumers

The Effect of Entry and Market Structure on Cellular Pricing Tactics

We test the effect of entry on the tariff choices of incumbent cellular firms. We relate the change in the breadth of calling plans between 1996, when incumbents enjoyed a duopoly market, and 1998, when incumbents faced increased competition from personal communications services (PCS) firms. Entry by PCS competitors differed across geographic markets due to the number of licenses left undeveloped as a result of the bankruptcy of some of the auctions’ winning bidders and due to variation across markets in the time required to build a sufficiently large network of wireless infrastructure. We find that incumbents increase tariff variety in markets with more entrants and that this effect is not explained by demographic heterogeneity or cost differences in maintaining calling plans across markets. We also find that incumbents are more likely to upgrade their technology from the old analog technology to the new digital technology in markets with more entry, suggesting that entry also has indirect effects on tariff choice via firms’ technology adoption decisions