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 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.     

Access regulation and infrastructure investment in the mobile telecommunications industry

While mobile virtual network operators (MVNOs) increase competition in the mobile telecommunications industry, granting market access to MVNOs may have unwanted consequences. In particular, infrastructure investment by incumbent mobile network operators (MNOs) may be smaller. This paper examines the effects of MVNO entry and access regulation on the investment behavior of MNOs. It uses firm-level data for 58 MNOs in 21 OECD countries during 2000–2008. The results suggest that mandated provision of access is related to lower investment intensity of MNOs, while voluntary access provision has no effect. Although reduced investment incentives do not necessarily correspond to under-investment, this underscores the need for those countries where MVNOs are provided access to address the issue of investment incentives.     

Diversification strategies in network-based services: The case of mobile virtual network operators

This paper aims at discussing the entry process and competitive strategies of MVNOs in Italy and France. It illustrates the features of competition in a sector – the mobile telecom service industry – which is characterized by market saturation and demand heterogeneity. In doing so, it looks at the characteristics of the two countries in terms of competition and entry of new operators, at the motivations behind the entry of MVNOs, and at the performance of different companies. Results show that the most successful MVNOs are those characterized by the ability to find a perfect match between their core competencies (large network management, strong brand reputation) and the needs of specific segments of demand that had not been previously fulfilled. In this context, companies with ICT network management skills, whether coming from the telecom sector or from other network-based service industries such as postal operators, have been particularly successful in the market. From a policy perspective, despite the failure of some MVNOs, customers have benefited from the increased competition between MNOs and MVNOs in terms of range of service offerings and prices.     

Competition in wholesale markets: Do MNOs compete to host MVNOs?

This paper extends previous research examining wholesale market shares of mobile network operators (MNOs). This study demonstrates that wholesale market concentration has decreased over time because of the increase of competition of MNOs for hosting mobile virtual network operators (MVNOs). However, differences in wholesale market shares between MNOs have not disappeared. We propose that those operators that are late entrants in a market and belong to an international group with a proactive attitude towards hosting virtual operators positively influences wholesale market shares of MNOs. The empirical analysis is based on a panel data from 2000 to 2010 corresponding to MNOs and virtual operators in five European countries with high development of the virtual mobile industry. By closely examining KPN we show how being an international mobile group specialising in the wholesale market across Europe has enabled it to exploit complementarities that exist between traditional and virtual businesses.     

On regulations for 5G: Micro licensing for locally operated networks

Future 5G networks aim at providing new high-quality wireless services to meet stringent and case-specific needs of various vertical sectors beyond traditional mobile broadband offerings. 5G is expected to disrupt the mobile communication business ecosystem and open the market to drastically new sharing based network operational models. 5G technical features of network slicing and small cell deployments in higher carrier frequencies will lower the investment barrier for new entrants to deploy local radio access networks and offer vertical specific services in specific areas and allow them lease the remaining required infrastructure on demand from mobile network operators (MNO) or infrastructure vendors. To realize the full vision of 5G to benefit the society and promote competition, innovation and emergence of new services when the 5G end-to-end network spans across different stakeholders administrative domains, the existing regulations governing the mobile communication business ecosystem are being refined. This paper provides a tutorial overview on how 5G innovations impact mobile communications and reviews the regulatory elements relevant to 5G development for locally deployed networks. This paper expands the recent micro licensing model for local spectrum authorization in future 5G systems and provides guidelines for the development of the key micro licensing elements. This local micro licensing model can open the mobile market by allowing different stakeholders to deploy local small cell networks with locally issued spectrum licenses ensuring pre-defined quality guarantees for the vertical sectors’ case specific needs.     

Evaluation of mobile services and substantial adoption factors with Analytic Hierarchy Process (AHP)

Emergence of new technological innovations in networks, platforms, and applications has enabled service providers to gain back their massive investment in their infrastructures. However, due to lagging adoption, many service innovations have failed to generate profit. The adoption of different mobile service categories depends on several factors. The current explorative study aims to use Analytic Hierarchy Process (AHP) to identify the most relevant mobile services for consumers and the factors driving the adoption. The results of the AHP analyses indicate that functionality of services is of utmost important for the majority of respondents. The results reveal that basic mobile communication services are the most preferred ones, although several services within different categories are available. The results have important implications for mobile network operators, service and application providers on how to develop and implement specific mobile services. The current study also offers new insights for researchers by showing that AHP is applicable to analyze consumers' preferences.     

Business ecosystem strategies of mobile network operators in the 3G era: The case of China Mobile

In order to define the mobile network operators' strategies of building value network in the 3G era, this paper applies the ecosystem principles to the mobile industry through a China Mobile case study. Based on an analytical framework of such principles, this paper reviews China Mobile's ecosystem, and identifies its success factors and problems. The results indicate that a complete ecosystem, where mobile network operators collaborate closely with value-added service providers, content/application providers, equipment and device manufacturers, and other involved organizations, can promote the development of mobile data services substantially. Therefore, mobile network operators should play a central role in the ecosystem by managing the entire value-chain and setting up proper value-sharing mechanisms. However, while doing so, problems may arise because of regulatory issues and information asymmetry. High-value common assets, a centralized management system, partner selection schemes and continuous innovations are important success factors.     

The role of mobile handsets in advanced network service evolution: Evidence from Japan

This paper aims at a better understanding of the mechanisms of mobile network service evolution through a closer examination of the context of mobile handsets. It aims first to establish quantitatively that mobile handsets are a determinant of mobile network service evolution patterns, and second, to develop a consistent perspective capable of explaining the evolution of various mobile network services. Despite the fact that mobile handsets are indispensable to users of mobile network services, surprisingly little is known about the role of these handsets in mobile network service evolution. This paper provides quantitative evidence of a positive relationship between intra-network-carrier penetration rates for mobile network service subscribers and mobile handsets designed for these services. The relationship is such that if one network service is diffused more than another, the mobile handsets related to the more diffused service are similarly more widely diffused in the market, and vice versa. The evidence is derived from an analysis of two mobile network services in Japan, mobile Internet and third generation mobile, initiated by NTT DoCoMo and KDDI. There are no existing studies that consistently explain the mechanisms of different mobile network service evolution patterns. Since the positive relationship that emerges from the analysis is consistent for both cases, by examining the mechanisms underlying this relationship, the paper develops an adequate and consistent perspective based on a constituent model reflecting the technological and competition structure of mobile network services. From this perspective, this positive relationship can be explained as the similarity or dissimilarity in essential technology ownership distribution across constituents. This perspective describes mobile network evolution in terms of changes in the distribution of essential technology ownership and, therefore, could be generalised more widely.     

The role of mobile network operators in next-generation public safety services

Field of researchThis research is in the field of public safety communications in mobile broadband 4G/5G networks. The focus is on mobile network operators and their business opportunities in the public safety market.PurposeThe purpose of this research is to provide a review of ongoing public safety mobile broadband projects in which mobile operators play a key role. In addition, a business model analysis is presented to determine the role of mobile operators in these projects. A comparison of the two key business models is also included to reveal their general characteristics.Methods and dataThe research used a qualitative method, an inductive case study. This method was used to draw general conclusions from a small number of case studies based on ongoing public safety mobile broadband projects. The Casadesus-Masanell and Ricart framework and the business model canvas were used to analyse and compare the two key business models discussed. Data were collected from a variety of sources, including company reports, press releases, international events and conferences, and selected interviews with managers in charge.FindingsThe results show that mobile operators have new business opportunities in the public safety market. Their existing mobile networks can be used for public safety services with certain enhancements. Within existing projects, mobile operators have different business models. The two analysed models were found to require different resources and offer different business opportunities for mobile operators. Procurement authorities responsible for selecting business models are encouraged to pay attention to the choice of model based on, for example, strategic objectives.ValueVery little research has been done on the business opportunities of mobile operators in the public safety market. In this area, this study lays the groundwork for new research. Procurement authorities can use the results when deciding on the business model. Mobile operators can benefit from these results by better understanding their own roles in public safety projects and when assessing the business opportunities of a particular project.     

Quality-adjusted international price comparisons of mobile telecommunications services

Many countries' policymakers have conducted international price comparisons of mobile telecommunications services to prevent service operators from overcharging subscribers. However, those comparisons have become more complicated because of the escalation in service usage and telecommunications expenditures spurred by the proliferation of smartphones and broadband LTE wireless internet service networks. The basket-based methodologies that have been widely used for international price comparisons are also limited—first, because the baskets for comparison may not be representative of actual service usage patterns in some countries; second, because they are difficult to apply to highly differentiated service plans due to the significant increase in wireless internet service usage and widely used plans with unlimited voice call service and SMS/MMS; and third, because they cannot consider the quality of service, such as upload and download speed in various service environments, at all. As an alternative, this paper proposes a hedonic pricing model that accounts for service quality and its variation in potentially disruptive environments, as well as fixed charge for a mobile phone additional to the price of service plans. The model was used to derive quality-adjusted price indices of mobile telecommunications services for twelve cities in ten countries with broadband LTE wireless internet service. The empirical results confirmed that the price index of each city varied significantly across the specifications,—both within the United States and internationally—depending on whether the model was constructed to reflect service quality and its variation on roads, in buildings, and in subways. The price index of each city also varied depending on whether the subsidized price of a mobile phone was considered part of the monthly price of a service plan. These results have important implications for policymakers seeking to understand the ultimate level of mobile telecommunication service prices for their country in a global context.     

Effective competition and ineffective mobile industry regulation in South Africa

The most striking feature of South Africa’s mobile market is the skewed allocation of spectrum and a seemingly endless sequence of failed attempts to hold an auction for it. A shortage of spectrum (or the inefficient assignment of it) is blamed, among other things, for South Africa’s relatively slow LTE 4G speeds. Through historical accident, the country has two mobile data networks in addition to the four licensed mobile operators. The response of operators has been to innovate using roaming and network sharing agreements; as we explore in this paper, these have become the de facto spectrum allocation process.This paper looks at how the de facto industry structure has been moulded by spectrum holdings and sharing arrangements and asks how spectrum management could be improved. We observe that, although the number of mobile operators has effectively been reduced to 3 (a number which would raise concern in some circles), there exist a variety of arrangements between those three and other spectrum and network operators. The smallest of the current three mobile operators is still not able to offer a nationwide mobile service without a roaming agreement but, at the same time, the two larger operators depend critically on spectrum and roaming agreements themselves, mainly with the two physical data network operators that function as wholesale providers.The Independent Communications Authority of South Africa (ICASA) was established as a consequence of a new constitution that was adopted in 1996 and it helped to create new institutional arrangements for the burgeoning mobile industry. The authority has nevertheless continued to be hampered, as we shall demonstrate, by political imperatives. This has been pointed out by other authors over the past twenty years and we add to this body of evidence by considering the spectrum auction planned (again) for 2021.The “2021” auction is in fact an iteration of the auction originally announced in May 2010 and then abandoned (Song, 2011). The same thing happened again in 2016 (Paelo & Robb, 2020). Late in 2020, the regulator again announced an auction, due to take place during 2021 but by the second quarter of the year, two of the four national operators had already obtained a court injunction to stop it. The process is intertwined with a political imperative to establish a public wireless open-access network, which we discuss in detail.We describe how the industry has navigated around policy and regulatory dysfunction and how competitive interaction among the South African operators has managed to prevail. Following Hausman & Taylor’s (2013) lead in their work on the United States, in this paper we provide a commentary on apparently perverse outcomes from significant regulatory, judicial and legislative actions (or, perhaps more accurately, inactions) governing the South African mobile telecommunications industry from the commencement of the current constitutional arrangements in 1996 to the present.     

Impacts of mobile Internet use intensity on the demand for SMS and voice services of mobile network operators: An empirical multi-method study of German mobile Internet customers

Scholarly and business publications alike convey the message that past and future strong growth in mobile Internet (MI) access and service demand has solely positive commercial implications for mobile network operators (MNOs). This position neglects the possibility that increasing MI use intensity may lead to demand decreases for the highly profitable short messaging service (SMS) and mobile voice telephony. The extant literature provides few insights on relations between MI use intensity, on the one hand, and SMS as well as mobile voice call use intensities, on the other hand. This study developed hypotheses concerning the presence or absence of impacts of MI use intensity and circumstances of MI use (e.g., device type, tariff scheme) on the demand for SMS and mobile voice telephony at the individual customer level. The hypotheses were tested by analyzing actual use behaviors of 304 MI adopters in Germany, for whom objective use intensity data were extracted from the billing system of an MNO. These non-reactive measures were combined with responses collected from the adopters through a telephone survey. Multivariate regression results suggest that though MI use intensity significantly negatively affected both number of SMS sent and received, these effects were so small that their practical relevance is highly doubtful. Further, customers who used MI more intensively did not generate lower volumes of outgoing or incoming mobile voice connection minutes. Conclusions are drawn for MNO, telecommunications sector regulators and scholarly researchers seeking to explain the acceptance of mobile communications services.     

Mobile money,family assistance and welfare in Cameroon

This paper aims to investigate the effect of mobile money services on the welfare in Cameroon. It specifically verifies whether the welfare of people benefiting from family assistance is improved via the mobile money services offered by the two main operators in the country, namely: Orange and Mtn. The data used come from the « FinScope Consommateur Cameroun » Survey carried out in 2017 by the National Institute of Statistics (INS). Based on the propensity scores estimations, this study shows a positive and significant effect of mobile money on welfare. However, among the operators, Orange has a better impact compared to Mtn which does not present a significant effect. These results call on the authorities in charge of the development and implementation of financial inclusion policies to recognize the interest of digital financial services at the heart of financial inclusion strategies for the welfare of the poor.     

Leadership with 5G in Europe: Two contrasting images of the future,with policy and regulatory implications

European policy makers have shown a keen interest in the success of 5G because ubiquitous and high capacity electronic communication infrastructure is recognized as a cornerstone of economic development and productivity growth. The second generation, GSM, is considered the leading example, reaching its peak of deployment in 2015 with 3.83 billion subscribers served by over 700 operators in 219 countries and territories.With 5G rapidly shaping up in the R&D and standardization environments, and a call for leadership with 5G in Europe by policy makers, it is timely to investigate what lessons can be learned from the success of 2G that can be applied to 5G. More broadly, this calls for research into the commonalities and differences between successive generations of mobile technology, their introduction and the market adoption that followed. This also calls for an investigation into the possibility of multiple futures of 5G and how that impacts the opportunity for leadership. As one future may be more desirable than the other, depending on the perspective of the actor involved, a policy debate will be required to determine the most desirable future. As well as a discussion of the policy and regulatory actions required to enable a particular future.Hence, the two-part research question being addressed in this paper is: What explains the success of 2G-GSM and how can it be applied to create success with 5G in the European Union?To respond to the research question this paper first identifies the leadership lessons to be drawn from the success of 2G-GSM in relation to its successors 3G and 4G. Secondly, the contribution describes two stylized images of possible futures of 5G, called “Evolution” and “Revolution”, as input to the policy debate on the options for leadership with 5G. These images reflect two extremes in terms of possible futures of 5G. “Evolution” follows the pattern of previous generations and current trends. “Revolution” represents a clear break with these trends and a path towards leadership with 5G, as it exploits the opportunities of standardized APIs for service creation, being enabled by network virtualization as an architectural foundation of 5G. These open and uniformly applied APIs allow the market entry of a multitude of virtual mobile network operators (VMNOs) serving particular industry verticals or economic sectors with tailored feature sets and qualities of services. They allow a market momentum to be built that constitutes leadership with 5G in Europe.     

A business case for 5G mobile broadband in a dense urban area

5G networks are envisioned to provide consumers and industry with improved transmission performance and advanced communication possibilities. To deliver on this promise of ushering in faster downloads and lower latency, mobile network operators are called upon for substantial investment in network infrastructure. Investors and operators need a clear 5G business case before making such investment. So far, very little research has been published on the topic of the 5G business case. This article studies the impact of different elements driving the business case of a 5G network. The study was performed within 3 boroughs of central London, UK, for the period 2020–2030. 5G-related costs and revenues were calculated to derive the business case. The results show that the business case for a 5G network providing mobile broadband services alone is positive over the time period 2020–2030 but has some risk in the later years of this time period. The business case is also particularly sensitive to assumptions on the revenue uplift and the rate of traffic growth which are inherently challenging to forecast. The sensitivity analysis shows that the return on investment becomes negative if both traffic and costs are significantly higher and revenues increase more slowly than our baseline forecasts. Network sharing helps to substantially improve the business case. Further research is needed to understand the business case on a regional or nationwide basis, and for a network that provides additional services beyond broadband.     

A fresh look at zero-rating

We provide an economic assessment of zero-rating offers in the context of mobile internet access services and draw six lessons: (1) Zero-rating can have several different characteristics that crucially affect their economic and welfare assessment. Thus, regulatory interventions must be based on a careful case-by-case analysis. (2) In the context of zero-rating offers, it is often crucial to evaluate the extent to which users are able to activate and deactivate a (throttled) zero-rated tariff option. If activation/deactivation is easy and instantaneous, a sound economic theory of harm for consumers will in many cases be hard to establish. (3) Similarly, if access to zero-rated partner programs is non-discriminatory and entails low barriers to entry, a sound theory of harm for content providers will usually not be given. (4) Zero-rating can be beneficial for consumers and (legal) content providers alike by contributing to a reduction of illegal content. Combined with throttling it can mitigate congestion problems. However, by requiring all content belonging to the same content category to be treated equally with respect to throttling, independent of whether a content provider opted for zero-rating or not, the existing regulation creates a negative externality on those content providers that do not wish to be zero-rated for some reason. (5) Particular attention should be paid to the impact of throttled zero-rating tariffs on the competition between mobile network operators (MNOs) and MVNOs. The latter may not be able to compete on equal footing with MNOs, because they benefit less from the traffic management aspects of zero-rating. (6) Competition among (infrastructure-based) ISPs provides a safeguard against severe rent extraction and, thus, an abuse of throttling and zero-rating as an exploitative device. Therefore, regulators should carefully account for the competitive environment and the existing tariff portfolio and options before deciding to intervene. Competition policy, rather than ex-ante regulation, may be more suitable for this task.     

Entering the mobile service market via mobile platforms: Qualcomm's BREW platform and Nokia's Preminet platform

The mobile telecommunication market has evolved from simple voice to multimedia services. In the past, the primary players in mobile services were local operators in different countries; international telecommunication vendors, such as Qualcomm and Nokia, were seldom involved in the mobile service market. In order to enter this market, Qualcomm and Nokia have separately introduced their mobile application platforms, called respectively BREW and Preminet. This paper examines how the two companies attempt to share the mobile service market through their mobile platforms and internationalized business models. This paper also analyzes their mobile platforms’ business models and their strategic implications.     

An institutional analysis of environmental management in the Korean mobile communications industry

Environmental sustainability in the mobile communications industry can affect corporations not only in the sector but also in other industries by providing solutions to cope with environmental issues. However, despite the significance of environmental sustainability in the industry, there has been a lack of academic attention. This study investigated the environmental issues in the mobile communications industry by adopting an integrated and holistic approach to corporate sustainable management. In addition, the environmental management of mobile network operators was analyzed using the framework of institutional theory. To investigate the environmental management of mobile network operators, we carried out a case study on three Korean mobile network operators including SK Telecom, KT, and LG Uplus. The results demonstrated that economic and environmental issues were mostly found in the mobile communications industry, and the mobile network operators have actively coped with these issues. Their environmental management was relatively active, and regulatory, mimetic and normative mechanisms were working simultaneously. This study provides some meaningful implications for practitioners and policymakers.     

Network effects and preference heterogeneity in the case of mobile telecommunications markets

This paper demonstrates how revealed- and stated-preference analyses can be used for modeling network effects in the field of mobile telecommunications. The aim of this study was to verify if network effects may still play a role in the Polish mobile telecommunications market, measure their strength, identify their sources and variability across consumers by accounting for consumers' observable and unobservable preference heterogeneity, evaluate their monetary value to consumers, and finally, to verify if the marginal utility associated with network effects is constant. The analysis of consumers' revealed choices (currently used mobile telephone operator) allowed the identification of major differences between customer bases of incumbent and new entrant operators, and insight into the business strategies adopted in the presence of asymmetric regulation of mobile termination rates. The second part of the study—the analysis of the consumers' stated choices (made in carefully prepared and designed hypothetical choice situations, known as the choice experiments) made it possible to directly model consumers' utility functions and, in this way, investigate the nature of network effects in mobile telecommunications markets. From the results, the presence of strong network effects, which are related to the ratio of consumers' social network group using the same operator, and to the magnitude of on-net price discounts, is confirmed. These network effects can be disaggregated to pecuniary and non-pecuniary effects. Through the utilization of the random parameters multinomial logit model, consumers' observable and unobservable preference heterogeneity can be accounted for, which proved a scientifically revealing and potentially policy-relevant approach. The results might be of a particular interest to other researchers aiming at modeling consumers' preferences as well as to mobile telephone operators and regulatory authorities—it is shown that capacity for vigorous price competition between mobile operators is limited by non-price factors, which affect subscriber's choices, especially in the presence of asymmetric mobile termination rates.