18 Pages Posted: 12 Apr 2010
Date Written: April 12, 2010
This model analyzes mobile network operators' (MNOs) incentives to invest in their facilities in the era of the mobile internet, given a widespread use of third generation (3G) services. Usually, MNOs agree on reciprocal roaming to offer full service to their subscribers. Roaming induces investment spillovers, as due to roaming agreements also rival customers benefit from investment of a MNO. It will be analyzed how different regimes of access regulation affect MNOs' incentives to invest. Semi-collusion on investments should be allowed, if investment spillovers are sufficiently large. The model is able to provide a rational for a ''bill-and-keep'' access pricing regime, proposed by the European Commission, given that a regulator is both able to determine access prices and investments. Given that a social planer only regulates access prices, an access price of zero may lead to over-and underinvestments from a welfare perspective.
Keywords: Mobile internet, Investment spillover, Access pricing, Access regulation
JEL Classification: L22, L51, L96
Suggested Citation: Suggested Citation