THE ECONOMICS OF MOBILE INTERNATIONAL ROAMING

International roaming is a hot topic in the telecommunications industry. Many countries have witnessed a downward trend in mobile domestic prices. On the contrary, international roaming prices remained reluctant to follow the domestic trend. In Europe, the service has been regulated with price cap since 2007, and regulation is maintained for years to come. The existing literature on the economics of international roaming has focused on theoretical modelling, which assumes a uniform retail price (i.e. common across visited networks). The main finding is that wholesale and retail prices rise with the number of visited networks. Additionally, vertical merger is found unprofitable; and home network steering does not cause downward pressure on wholesale prices. We found that the assumption of uniform retail pricing leads to results that are inconsistent with wholesale competition because visited networks appear in the demand as complements rather than substitutes. We present theoretical models that match the existing literature’s findings, and compare results to the case whereby the retail price is discriminatory (i.e. differs by visited networks). With discriminatory retail, substitutability of networks reduces prices, and the incentive for vertical merger exists. In a steering game, steering is found able to reduce wholesale prices; and networks alliances are formed in equilibrium. The empirical literature on international roaming is limited to few industry studies. We use an aggregated dataset on prices and quantities for networks visited by roamers from one major mobile provider whose subscribers travel a lot across the world, Etisalat. The study period witnessed a retail price shift from discriminatory to uniform. The main findings are: (1) competition, as measured by the number of visited networks, reduces wholesale price; (2) traffic steering is effective, especially towards preferred networks (alliance and cross-owned); (3) only alliance networks offer wholesale discounts; and (4) demand is more elastic than crude industry studies.

Name dc:type.qualificationname

phd

Level dc:type.qualificationlevel

doctoral

Grantor dc:publisher.institution

University of East Anglia

Year dc:date.issued

2013

Author dc:creator

• Alkatheeri, Saeed

Language dc:language

en