Discussion Papers

Dr. Ulrich Stumpf

Prospects for Improving Competition in Mobile Roaming
Nr. 232 / März 2002


The paper looks at the perspectives for more competition in international roaming and focuses in particular, on wholesale roaming markets. It analyses the structural conditions of wholesale roaming markets that have impaired incentives to competition in the past, namely (1) a high combined market share of the two leading operators combined with second mover disadvantages of operators licensed at a later stage, and (2) demand externalities associated with customer ignorance and lack of control over network selection.

The paper argues that a number of developments are under way that are likely to modify this situation in the future. First, with the introduction of SIM over-the-air programming, home mobile operators will be able to direct customers to visited networks with the lowest wholesale roaming charges (preferred roaming). As dual mode handsets become ubiquitous and as new entrant GSM 1800 operators reach nationwide coverage, second-mover disadvantages will disappear. Given the relatively small roaming volumes that GSM 1800 operators currently provide, they should have a strong incentive to lower charges in exchange for preferred roaming status.

Second, on the demand side of wholesale roaming markets, it will be the larger GSM 900 operators, and in particular those with a pan-European footprint, that will ask for lower wholesale roaming charges in exchange for preferred roaming status. This could lead to structural disadvantageous of mobile operators in downstream retail markets that do not have a similar pan-European footprint and that lack the bargaining power, which could impair competition on the retail level. However, arbitrage by roaming brokers, new entry and wider geographical markets on the retail roaming level could work against this.

Diskussion Paper is available for download.

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