Horizontal Cooperation on Investment: Evidence From Mobile Network Sharing

45 Pages Posted: 8 Jun 2020

See all articles by Anca Cojoc

Anca Cojoc

affiliation not provided to SSRN

Marc Ivaldi

Toulouse School of Economics; Centre for Economic Policy Research (CEPR)

Frank P. Maier-Rigaud

ABC economics; IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods

Oliver März

NERA Economic Consulting, Berlin

Multiple version iconThere are 2 versions of this paper

Date Written: May 5, 2020

Abstract

We present a structural model to investigate the effects of horizontal cooperation on investment in the context of telecommunication networks. More specifically, we estimate the effect of network sharing in the mobile telecommunications industry on prices, network quality and consumer welfare. The presented framework allows estimating the effects of different types of sharing agreements including common ownership of shared assets in a joint venture company or collaboration via geographical separation (geo-split principle). The proposed identification strategy relies on differences in the costs of network deployment of shared versus non-shared network infrastructure, with different costs affecting operators’ optimal choice of price and network quality. We apply the structural model to estimate the effects of a network sharing agreement in the Czech Republic, using a combination of unique datasets on prices, network quality measured as average download speed and operator’s costs of network deployment. The results of our model indicate that horizontal cooperation on investments may be beneficial for consumers. Specifically, the network sharing agreement under study generated cost savings for the sharing parties, which were passed-on to consumers in the form of lower prices and higher average download speed. Our findings are of relevance to the assessment of network sharing agreements, which, considering the substantial investment cost associated with the 5G technology, are likely to play an even greater role in the telecommunications industry in the future. The findings are also of relevance to the general literature on horizontal cooperation on investments.

Keywords: mobile telecommunication networks, network sharing, cooperation on investment, 4G, 5G horizontal cooperation; empirical industrial organization

JEL Classification: L40, L96, L11

Suggested Citation

Cojoc, Anca and Ivaldi, Marc and Maier-Rigaud, Frank P. and März, Oliver, Horizontal Cooperation on Investment: Evidence From Mobile Network Sharing (May 5, 2020). Available at SSRN: https://ssrn.com/abstract=3593732 or http://dx.doi.org/10.2139/ssrn.3593732

Anca Cojoc

affiliation not provided to SSRN

Marc Ivaldi

Toulouse School of Economics ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France
+33 5 61 12 8592 (Phone)
+33 5 61 12 8637 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Frank P. Maier-Rigaud (Contact Author)

ABC economics ( email )

Berlin, 10115
Germany
10115 (Fax)

HOME PAGE: http://www.ABCecon.com

IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods ( email )

Socle de la Grande Arche
1 Parvis de la Défense
Paris, La Défense Cedex, 92044
France

Oliver März

NERA Economic Consulting, Berlin ( email )

Unter den Linden 14
Berlin, 10117
Germany

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