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Voluntary relationships among mobile network operators and mobile virtual network operators: An economic explanation

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  • Banerjee, Aniruddha
  • Dippon, Christian M.
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    Abstract

    Mobile virtual network operators (MVNOs) do not hold spectrum licenses and own little or no network infrastructure. Rather, they resell mobile services by purchasing airtime at wholesale rates from mobile network operators (MNOs). Unlike ordinary resellers, MVNOs rely on brand appeal and reputation acquired in other businesses to sell mobile services (often bundled with other products). Significant worldwide growth in voluntary MNO-MVNO partnerships, without intervention from public policies that mandate MVNO access to MNO networks, raises many interesting issues. Since MNOs that sell wholesale services to MVNOs potentially forfeit sales in downstream retail markets, voluntary relationships are plausible only if MVNOs add value by widening and/or deepening MNO-served markets. This paper provides sufficient conditions for profit-maximizing MNOs and MVNOs to form voluntary strategic partnerships based on resale, product differentiation, and rebranding. The two key factors are (1) value of the MVNO's brand reputation and (2) wholesale discount at which the MNO offers service to the MVNO.

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    Bibliographic Info

    Article provided by Elsevier in its journal Information Economics and Policy.

    Volume (Year): 21 (2009)
    Issue (Month): 1 (February)
    Pages: 72-84

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    Handle: RePEc:eee:iepoli:v:21:y:2009:i:1:p:72-84

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    Web page: http://www.elsevier.com/locate/inca/505549

    Related research

    Keywords: Mobile virtual network operator Mobile network operator Voluntary strategic partnership Profit maximization Brand reputation Price elasticities Wholesale discount;

    References

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    1. Economides, Nicholas, 1998. "The incentive for non-price discrimination by an input monopolist," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 271-284, May.
    2. Mandy, David M, 2000. "Killing the Goose That May Have Laid the Golden Egg: Only the Data Know Whether Sabotage Pays," Journal of Regulatory Economics, Springer, vol. 17(2), pages 157-72, March.
    3. Joshua S. Gans & Stephen P. King & Julian Wright, 2005. "Wireless Communications," Development Research Unit Working Paper Series archive-45, Monash University, Department of Economics.
    4. Lewis, Tracy R. & Sappington, David E. M., 1999. "Access pricing with unregulated downstream competition," Information Economics and Policy, Elsevier, vol. 11(1), pages 73-100, March.
    5. Weisman, Dennis L, 1998. "The Incentive to Discriminate by a Vertically-Integrated Regulated Firm: A Reply," Journal of Regulatory Economics, Springer, vol. 14(1), pages 87-91, July.
    6. Weisman, Dennis L, 1995. "Regulation and the Vertically Integrated Firm: The Case of RBOC Entry into Interlata Long Distance," Journal of Regulatory Economics, Springer, vol. 8(3), pages 249-66, November.
    7. Valletti, Tommaso M., 0. "Spectrum trading," Telecommunications Policy, Elsevier, vol. 25(10-11), pages 655-670, October.
    8. Noam, Eli, 1997. "Beyond spectrum auctions. Taking the next step to open spectrum access," Telecommunications Policy, Elsevier, vol. 21(5), pages 461-475, June.
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    Cited by:
    1. Key Pousttchi & Yvonne Hufenbach, 2011. "Value Creation in the Mobile Market," Business & Information Systems Engineering, Springer, vol. 3(5), pages 299-311, October.
    2. Brito, Duarte & Pereira, Pedro & Vareda, João, 2012. "Incentives to invest and to give access to non-regulated new technologies," Information Economics and Policy, Elsevier, vol. 24(3), pages 197-211.

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