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

Authors:
Livio Cricelli;Michele Grimaldi;Nathan Levialdi Ghiron
Affiliations:
Universití degli Studi di Cassino, Dipartimento di Meccanica, Strutture, Ambiente e Territorio, Via G. Di Biasio 43, 03043 Cassino (FR), Italy;Universití degli Studi di Cassino, Dipartimento di Meccanica, Strutture, Ambiente e Territorio, Via G. Di Biasio 43, 03043 Cassino (FR), Italy;Universití degli Studi di Roma "Tor Vergata", Dipartimento di Ingegneria dell'Impresa, Viale del Politecnico 1, 00133 Roma, Italy
Venue:
Telecommunications Policy
Year:
2012

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Abstract

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.