The competition among mobile network operators in the telecommunication supply chain

Livio Cricelli, Michele Grimaldi, Levialdi Ghiron

International Journal of Production Economics

Abstract:  In the mobile telecommunication sector, the high competitiveness has increased the complexity of strategic interactions among operators. As the vertical integration has become anything but a choice and not a compelling technical solution, the contest takes place at different levels of the components of the operator value chain: the network infrastructure, the service development and supply, and the relationship with consumers.

Mobile virtual network operators act as retailers and concentrate on the last segment of the value chain by establishing commercial agreements with hosting network operators, which act as manufacturers, to get access to radio communications infrastructure. Productive processes of mobile services offered by operators are different and this difference is imperceptible to customers. Processes difference mainly consists in the infrastructural diversity of the operators and implies different consequences on each network service element.

A model has been defined to analyze the consequences of such diversity in the competition among HNOs, MNOs, and MVNOs by focusing the attention on the characteristics of the call path, in dependence of the types of operators. In fact, many variables interact to define the call path, such as marginal costs and revenues, infrastructural investments, and interconnection charges among operators. The analysis of the results, obtained by the model, gives information on variations of retail prices, market shares, and profit allotment, to adopt the proper strategies. In particular, the model results shed light on how certain MVNOs should enter the markets and adopt a collaborative strategy with HNOs. The model owns the capability of being applied to different contexts, thus representing for the regulator a potential instrument of relevant usefulness.

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