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Do International Roaming Alliances Harm Consumers?


  • Benno Bühler

    (Toulouse School of Economics (IDEI))


We develop a model of international roaming in which mobile network operators (MNOs) compete both on the wholesale market to sell roaming services to foreign operators and on the retail market for subscribers. The operators own a network infrastructure only in their home country. To allow their subscribers to place or receive calls abroad, they have to buy roaming services provided by foreign MNOs. We show that in absence of international alliances and capacity restrictions, competition between foreign operators would drive wholesale unit prices down to marginal costs. However, operators prefer to form international alliances in which members mutually provide roaming services at inefficiently high wholesale prices. Alliances serve as a commitment device to soften competition on the retail market and harm consumers through excessively high per call prices. Although operators compete in two-part tariffs for subscribers, wholesale roaming prices do not exhibit profit-neutrality as do access prices in related models of net- work interconnection. We also show that international alliances are endogenously formed if not prevented by regulation.

Suggested Citation

  • Benno Bühler, 2009. "Do International Roaming Alliances Harm Consumers?," Working Papers 2009.93, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2009.93

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    References listed on IDEAS

    1. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
    2. Mark Armstrong & Julian Wright, 2009. "Mobile Call Termination," Economic Journal, Royal Economic Society, vol. 119(538), pages 270-307, June.
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    7. Fabio Manenti & Paolo Lupi, 2006. "Roaming the Woods of Regulation: Public Intervention vs Firms Cooperation in the Wholesale International Roaming Market," "Marco Fanno" Working Papers 0019, Dipartimento di Scienze Economiche "Marco Fanno".
    8. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
    9. Sutherland, Ewan, 2001. "International roaming charges: over-charging and competition law," Telecommunications Policy, Elsevier, vol. 25(1-2), pages 5-20, February.
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    11. Salsas, Roger & Koboldt, Christian, 2004. "Roaming free?: Roaming network selection and inter-operator tariffs," Information Economics and Policy, Elsevier, vol. 16(4), pages 497-517, December.
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    More about this item


    International Roaming; Vertical Relations; Regulation;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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