Competition and cooperation among telecom enterprises

Abstract

Telecommunications industry is a strategic, precursory and basic public service industry, and it plays an important role in the national economy. The quality of telecommunications networks and the healthy development of the telecommunications market are the basis for ensuring that the telecommunications industry fully exerts the role of "booster" for economic growth. To address the issue of poor interconnection among Internet service providers (ISPs) and the "dumb pipe" dilemma faced by mobile operators, this thesis models and analyzes the horizontal relationship among ISPs and the vertical relationship between ISP and content providers (CPs). Chapter 2 designs an interconnection settlement that can motivate ISPs to interconnect with each other through Network Access Point (NAP). How to coordinate ISPs with different interests via a reasonable interconnection settlement mechanism thus to achieve effective interconnection among ISPs has always been an important issue of concern to the government and the industry. To cope with this issue, a cooperative game framework is adopted to study the profit allocation among multiple ISPs. We propose a Characterized Profit Allocation (CPA) that meet the principles of fairness and the principle of win-win, and we also design an interconnection settlement mechanism based on CPA to enable the ISPs to act independently but achieve global optimality. Analytical results and numerical experiments show that CPA and its corresponding settlement rule can stimulate ISPs to interconnect with each other through NAP in a variety of realistic situations, effectively improve social welfare, and provide theoretical basis for the design of the interconnection settlement at NAPs. Chapter 3 investigates ISP's and CP's competition strategies and profits when sponsored data services are offered from a supply chain perspective. Sponsored data is an innovative business model that allows content providers to pay for the data traffic generated by users while visiting the sponsoring CP's content. Sponsored data changes user's traditional payment model. It has a great impact on the benefits of all parties including CP, users and ISP, and it also brings a lot of controversy. This study applies a game model to study the equilibrium decisions and profits of the ISP and the CP under sponsored data in different situations. We classify CPs as subscription CPs and platform CPs and carry out analysis for these two types of CPs respectively. Our analysis suggests that social welfare is enhanced when a platform CP participates in sponsored data services, and the result is mixed when the sponsoring CP is a subscription CP. For the ISP, offering sponsored data services enhances its profit no matter the sponsoring CP is of which type. For the CP, sponsored data services reduce its profit with a few exceptions. These results provide managerial insights and are useful for ISPs and CPs when making relevant decisions. Chapter 4 investigates the competition strategies and profits of ISP and CP when sponsored data services are offered in a market where both horizontal competition between ISPs and vertical competition between ISP and CP exist simultaneously. We also apply a game model to study the equilibrium decisions and profits of two ISPs and one CP under different market structures when sponsored data services are offered. Results show that even in a market where two ISPs compete, ISPs can still profit from sponsored data, and unintegrated ISP can improve its weak position by implementing sponsored data in a market where there is vertical integration between ISP and CP. CP's profit is reduced in most situations, and only CP with strong profitability can improve its profit by offering subsidy to users of both ISPs. ISP and CP should take full consideration of their strategic goals of both market share and profit when choosing cooperation method and integration strategy. From a social welfare perspective, sponsored data has a positive effect in most cases with some exceptions, and the positive effect is more pronounced when the competition between ISPs is intense. These findings provide practical guidance for telecom enterprises' integration strategies and sponsored data decisions, and provide a theoretical basis for the regulation of the telecommunications market.