Foreclosing or collusive equilibria in the roaming market: a model of Mobile Virtual Network Operator’s entry.

The paper deals with the entry of Virtual Network Operators into the mobile communication sector and it proves that (static) non-cooperative foreclosing or collusive equilibria in the upstream roaming market are sustainable even if there exist more incumbents. This depends on the increase in the downstream complementarity that occurs when an incumbent contracts the entrant’s upstream roaming access. In fact, the agreement causes a stronger attitude to implement a less aggressive price competition in the downstream market and, when the incumbents are tacitly coordinated to some foreclosing access charges, the same complementarity is the weakness of a potential upstream deviator that faces a more aggressive competition in the downstream market. In the first part of the paper we give some evidences that even if exogenous, the entries of new competitors have represented a significative increase in the diffusion speed of mobile communication service. We propose an Arellano-Bond dynamic panel data estimation on European countries from 1985 to 2003