Roaming and investments in the mobile internet market

This model discusses mobile network operators' (MNOs) incentives to invest in their network facilities such as new 4G networks under various regimes of data roaming charge regulation. Given an induced externality of investments (spillovers) due to the roaming agreements it will be shown that MNOs, competing on investments, widely set higher investments for below cost regulation of roaming charges. Otherwise, if MNOs are free to collaborate on investments, they set higher investment levels for above cost roaming charges. Both below and above cost charges may be preferred from a welfare perspective. Furthermore, the paper discusses effects of the roaming charge regulation on roaming quality and MNOs' coverage.

► I analyze mobile network operators' investment incentives in the presence of roaming.
► Competing MNOs widely increase investments for below cost roaming charges.
► Colluding MNOs increase investments for above cost roaming charges.
► Below and above cost charges may be preferred from a welfare perspective.
► Higher roaming charges lead to better roaming quality.