Roaming charges for customers of cellular-wireless entrant and incumbent providers

TL;DR

This paper models a game-theoretic analysis of roaming charges between a large incumbent and a small entrant in cellular markets, proposing a fair regulation that balances revenues with infrastructure costs.

Contribution

It introduces a simple game-theoretic model to determine fair roaming charges that prevent barriers to entry and ensure proportional revenues.

Findings

Identifies a Nash equilibrium roaming charge.

Proposes a fair roaming charge based on infrastructure costs.

Shows regulation can prevent entry barriers.

Abstract

We consider a simple two-player game involving a large incumbent and small entrant into a cellular wireless access provider marketplace. The entrant's customers must pay roaming charges. We assume that the roaming charges are regulated, because if they are dictated by the incumbent then they could be set so high so as to be a barrier to entry in the marketplace. The game is studied at its Nash equilibrium. A roaming charge is identified that is arguably fair in the sense that revenues for the access providers are proportionate to their infrastructure costs.