The impact of regulating mobile termination rates and MNO–MVNO relationships on retail prices

A mobile virtual network operator (MVNO) provides mobile telecommunication services by eluding the constraints of the radio communication infrastructure and establishing an agreement with a hosting network operator (HNO) for the use of its spectrum. Thus, MVNOs offer a wide range of mobile services...

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Bibliographic Details
Published in:Telecommunications policy 2012-02, Vol.36 (1), p.1-12
Main Authors: Cricelli, Livio, Grimaldi, Michele, Levialdi Ghiron, Nathan
Format: Article
Language:English
Subjects:
Collaboration
Competition
Competition model
Consumers
Economics
Mobile communication systems
Mobile phones
Mobile telecommunications industry
Mobile termination rate
Mobile virtual network operators
Negotiation
Negotiations
Networks
Operators
Price cuts
Prices
Radio
Radio communications
Reduction
Regulation
Retail prices
Strategic planning
Strategy
Studies
Telecommunications
Telecommunications industry
Telecommunications policy
Virtual networks
Welfare measurement
Wireless carriers
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Summary:A mobile virtual network operator (MVNO) provides mobile telecommunication services by eluding the constraints of the radio communication infrastructure and establishing an agreement with a hosting network operator (HNO) for the use of its spectrum. Thus, MVNOs offer a wide range of mobile services and directly compete with every mobile network operator (MNO). This paper studies the economic justifications for potential regulatory intervention that defines the level of mobile termination rates (MTRs) and negotiations and agreements among MVNOs and HNOs. The results show that symmetric MTR reduction leads to competition growth among operators, forcing every operator to reduce retail prices and, consequently, to enhancing consumer welfare. The paper also finds that a collaborative strategy adopted by an HNO and an MVNO is advantageous for both and induces a reduction in retail prices, thus weakening other MNOs. ► Analysis of the competition among HNOs, MNOs and MVNOs. ► Economic and welfare consumer justifications for the regulatory intervention. ► Symmetric MTRs reduction leads to a competition growth. ► Symmetric MTRs reduction forces every operator to reduce retail prices. ► Collaborative strategies between HNOs and MVNOs is advantageous for both of them.
ISSN:0308-5961
1879-3258
DOI:10.1016/j.telpol.2011.11.013