Does Regulation Impact the Entry in a Mature Regulated Industry? An Econometric Analysis of MVNOs

Since 1998, the European telecommunications industry is entered into a liberalization phase. In mobile markets, the liberalization policy induces the introduction of competition between a larger number of competitors and a decrease in retail prices. However, the assessment of national markets reveals insufficient competition between network operators and a new regulation was proposed to facilitate private investments into this mature industry.This paper investigates the determinants of the fringe entry into European mobile telecommunications markets between 1998 and 2005. More precisely, we intend to answer the following question: how do cross-national differences in the market structure and the regulatory design (regulatory incentives and governance) affect the number of Mobile Virtual Network Operators’ (MVNOs) in mobile markets? We test a set of hypothesis using internationally comparable variables of economic and regulatory determinants and allowing for ten European Member States and temporal fixed effects on 8 years. We infer the hypotheses to predict cross-national variations in the number of MVNOs entries. We then control for the potential effects of the contractual governance of the MVNOs’ access to the incumbents’ mobile networks. We demonstrate that the amount of fringe entry into a mature industry is the result of both the strategic behavior of the incumbents towards hosting MVNOs on their networks and the adoption of credible regulations to prevent the exercise of strategic entry-deterring activities. Our findings are salient for policymakers and practitioners alike.