Prospects for Improving Competition in Mobile Roaming

Ulrich Stumpf

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Prospects for Improving Competition in Mobile Roaming

Ulrich Stumpf

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Abstract

The ability to make international roaming calls is of increasing importance to customers in Europe. This contrasts with various complaints that retail prices of roaming calls are rigid and excessive. The focus if the paper is on wholesale roaming, which is the prime determinant of retail roaming prices. The paper analyses the structural conditions of wholesale roaming markets that have impaired incentives to competition, namely high combined market share of the two leading GSM 900 operators combined with second mover disadvantages for new entrant GSM 1800 operators, and demand externalities. The paper argues that a number of developments are under way that are likely to modify this situation in the future. With the introduction of SIM over-the-air programming, home mobile operators will be able to direct customers to networks with the lowest charges. As dual mode handsets become ubiquitous and as new entrant GSM 1800 operators reach nationwide coverage, second-mover disadvantages will disappear. Given the relatively small roaming volumes that GSM 1800 operators currently provide, they should have an incentive to lower charges in exchange for preferred roaming status. On the demand side of wholesale roaming markets, it will be the larger GSM 900 operators, and in particular those with a pan-European footprint, that will ask for lower charges in exchange for preferred roaming status. This could discriminate against mobile operators in downstream retail markets that do not have a pan-European footprint and that lack the bargaining power. However, arbitrage by roaming brokers, new entry and wider geographical markets on the retail roaming level will work against this.

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Ulrich Stumpf. 2001-10-22. Prospects for Improving Competition in Mobile Roaming. https://arxiv.org/abs/cs/0109115

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