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Economic analysis of the introduction of the MVNO system and its major implications for optimal policy decisions in Korea

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  • Kim, Byung Woon
  • Seol, Seong Ho

Abstract

This study analyzes the anticipated economic effects arising from the introduction of the mobile virtual network operator (MVNO) system in the mobile communications service market. For the analysis, actual data (or estimated data)--such as price elasticity, the number of subscribers, traffic volume, rate, and access charge--were combined with an assumption about a competition scenario in the future market. Based on this analysis, consumer surplus, and change in the service provider's profits were estimated according to the type of policy that may be adopted for the MVNO system by the regulator. The results of the analysis indicate that consumer surplus appears to increase largely because of the reduction of the mobile service rate by the promotion of "service-based competition," which occurs upon adoption of an MVNO policy in the mobile communication service market. Moreover, the introduction of an MVNO system into the mobile communication market seems to be socially beneficial regardless of policy type if access charges are set reasonably by a cost-plus or retail-minus method. In particular, in order to make sense of the introduction of a special MVNO, whether by the cost-plus method or the retail-minus method, the correct discount rate must be used in setting an access charge between the special MVNO and the significant market power (SMP) mobile network operator (MNO).

Suggested Citation

  • Kim, Byung Woon & Seol, Seong Ho, 2007. "Economic analysis of the introduction of the MVNO system and its major implications for optimal policy decisions in Korea," Telecommunications Policy, Elsevier, vol. 31(5), pages 290-304, June.
  • Handle: RePEc:eee:telpol:v:31:y:2007:i:5:p:290-304
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    Cited by:

    1. Kim, Byoungsoo, 2012. "The diffusion of mobile data services and applications: Exploring the role of habit and its antecedents," Telecommunications Policy, Elsevier, vol. 36(1), pages 69-81.
    2. Cricelli, Livio & Grimaldi, Michele & Levialdi Ghiron, Nathan, 2012. "The impact of regulating mobile termination rates and MNO–MVNO relationships on retail prices," Telecommunications Policy, Elsevier, vol. 36(1), pages 1-12.
    3. Ko, Eunju & Hwang, Yoo Kyung & Kim, Eun Young, 2013. "Green marketing' functions in building corporate image in the retail setting," Journal of Business Research, Elsevier, vol. 66(10), pages 1709-1715.
    4. Corrocher, Nicoletta & Lasio, Laura, 2013. "Diversification strategies in network-based services: The case of mobile virtual network operators," Telecommunications Policy, Elsevier, vol. 37(11), pages 1110-1123.
    5. Pearcy, Jason & Savage, Scott J., 2015. "Actual and potential competition in international telecommunications," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 94-105.
    6. Liao, Chun-Hsiung & Lien, Chun-Yu, 2012. "Measuring the technology gap of APEC integrated telecommunications operators," Telecommunications Policy, Elsevier, vol. 36(10), pages 989-996.
    7. Garrido, Elisabet & Whalley, Jason, 2013. "Competition in wholesale markets: Do MNOs compete to host MVNOs?," Telecommunications Policy, Elsevier, vol. 37(11), pages 1124-1141.
    8. Kim, Byung Woon & Park, Joonho & Youl Ko, Chang, 2013. "Cost allocation of WCDMA and wholesale pricing for mVoIP and data services," Telecommunications Policy, Elsevier, vol. 37(1), pages 35-47.
    9. Forde, Tim & Doyle, Linda, 2013. "Cellular clouds," Telecommunications Policy, Elsevier, vol. 37(2), pages 194-207.

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