Competition for Partners: Strategic Games in Wholesale International Roaming

High international roaming prices have puzzled and occupied analysts and regulators for quite a time. While on the retail side the problem seems to be well understood, and the high margins can be justified using Ramsey pricing logic, on the wholesale side the picture is not so clear. Recent contributions find reasons for regulation based on the existence of random traffic and on the bilateral nature of the wholesale deals, which raise the equilibrium prices even when operators can choose a preferred network. This paper intends to investigate whether or not those concerns are justified. This is done by modelling the bilateral roaming negotiations and extending the current models, assuming that home operators (the ones with a retail contract with the customer in its country of residence) can decide not only their preferred network in each visited country, but also the distribution of their outbound traffic among the visited operators. We find that when traffic steering is perfect the wholesale market is competitive, and that the lower prices are passed on to end users through competition for retail customers. The bilateral nature of international roaming wholesale deals is actually an additional source of competition on the retail market for mobile services because the roaming out traffic (the traffic of an operator's retail customers abroad) and the roaming in traffic (the traffic of foreign customers that an operator is able to attract) are directly linked. --

COMPETITION AT LAST? AN ECONOMIC ANALYSIS OF CURRENT MOBILE DATA ROAMING REGULATIONS IN EUROPE

The mobile data roaming market in the European Union is characterized by a lack of competition which is one of the main reasons for wholesale and retail prices being well above cost-based prices. In 2012, the European Commission has enacted new regulatory measures such as allowing for more players competing in the wholesale data roaming market and forcing mobile network operators to unbundle roaming services from domestic offers by 2014. Moreover, the European Commission recently proposed the elimination of roaming charges by 2016. Nevertheless, it remains unclear whether these measures will ultimately result in more competition and, thus, in increased social welfare. Drawing on existing research from IS, telecommunications and regulation domains, we propose the development of an analytical model to evaluate the economic implications of these regulatory measures

Regulating Mobile Telephony? *

Extended Abstract This paper analyzes how competition works in mobile telecommuncations markets and, bases on this analysis, we discuss whether regulatory intervention in mobile telephone markets is justified from an economic perspective. Starting point of our analysis is the observation that an evaluation of regulatory interventions into mobile telecommunications markets cannot be made without a deeper understanding for competitive processes in mobile telephony. What is of decisive relevance for understanding competition in mobile telephony, is the fact that building a mobile telephone network requires highly specific investments, which take place under significant uncertainty, as investments in 3G networks such as UMTS illustrate. An inevitable consequence of specific investments are sunk costs. Hence, one can only expect firms to extensively invest and innovate if firms can hold a justified expectation to work profitably after they have invested. To cover their capital costs, which are largely fixed and not avoidable, firms need to follow a pricing policy that involves prices above incremental costs. Hence, a key determinant for mobile operators' price policy lies in their cost structure, which is characterized by high fixed and common costs that are also sunk and relatively low incremental costs. In such situations, efficiency demands so-called Ramsey pricing structures, which involves different mark-ups for different services. In contrast, a situation with uniform mark-ups will generally be inefficient. Instead, services with an inelastic demand should carry relatively high prices, while services, for which the demand is rather elastic, should be priced close to marginal costs. Exactly such a pricing structure results when unregualted firms are left to maximize their profits. Hence, the factor that prices and mark-ups differ between different services and markets is an efficiency imperative and not a sign for market failure. Nevertheless the necessity of interconnection and fixed-to-mobile termination may give rise to competition problems. As we argue in this paper, closer analysis shows that these problems do not automatically imply that sector specific regulation is warranted. The same hold for the question of regulated mobile number portability

Transparency, Technical Aspects and Data Overview related to the Proposed Regulation on Roaming

The object of the present briefing is to analyse some of the fundamental aspects of the legal proposal by the European Commission on the subject of roaming, COM (2006)382 on 12 July 2006, which proposed to modify the regulation of mobile communications, resulting in important reductions of roaming tariffs within the Community. The briefing examines the efficiency and concrete applicability of the measures introduced by the Regulation Proposal, which created the “Mechanism of the Domestic European Market” and the envisaged requirements of transparency and information on roaming costs charged by mobile network operators (MNOs). The briefing consists of four sections, analysing the following issues: Transparency, Technical Infrastructure, Overview of Existing Data, and Feasibility of Technical Implementation

A strategic approach to network value in network industries

This article extends previous research on network industries by analyzing the role that firm strategy plays in markets where network effects are important. The authors postulate that firms can benefit from the existence of network effects through their strategic choices. The main premise of this article is that companies, by influencing expectations, coordination, and compatibility, can leverage network effects and network value. The authors empirically test their hypotheses in the mobile telecommunications industry, a paradigmatic example of a network industry. This study not only seeks to understand the impact of firm strategy on network value but also analyzes the impact of the latter on firm performance

A Strategic Approach to Network Value in Network Industries

This article extends previous research on network industries by analyzing the role that firm strategy plays in markets where network effects are important. The authors postulate that firms can benefit from the existence of network effects through their strategic choices. The main premise of this article is that companies, by influencing expectations, coordination, and compatibility, can leverage network effects and network value. The authors empirically test their hypotheses in the mobile telecommunications industry, a paradigmatic example of a network industry. This study not only seeks to understand the impact of firm strategy on network value but also analyzes the impact of the latter on firm performance

Analysis of International Mobile Roaming and the European International Roaming Regulation

Institut ekonomických studiíInstitute of Economic StudiesFakulta sociálních vědFaculty of Social Science

Regulation of international mobile roaming in the Southern African Development Community

The Southern African Development Community (SADC) experiences high levels of cross border human traffic due to trade, cultural and language links across the fifteen countries. Technological advances and increased domestic competition have contributed to lower domestic retail tariffs for mobile cellular services. Unfortunately, this has not extended to international mobile roaming (IMR) retail tariffs which remain unacceptably high. These high tariffs have attracted harsh criticism from commentators and prompted calls for regulatory intervention. This study investigates the level of international mobile roaming (IMR) retail tariffs, usage and demand elasticity. It further considers whether competition or regulation play a greater role in reducing these tariffs and whether regulatory intervention is likely to reduce competition. The research took the form of a quantitative study and used an online survey questionnaire as the data collection tool. The results of the study confirmed that international mobile roaming (IMR) retail tariffs are indeed high, resulting in poor uptake by cost conscious travellers who pay for their own cellular usage. The finding that competition plays a greater role than regulation in reducing IMR retail tariffs is not significant. It was concluded that neither competition nor regulation are sufficient on their own to provide increased social welfare. The best result is obtained when competition is allowed to flourish, underpinned by an enabling regulatory framework. CopyrightDissertation (MBA)--University of Pretoria, 2010.Gordon Institute of Business Science (GIBS)unrestricte