R&D Investments for Mobile Network Operators

Nowadays, in the era of the global development of mobile telecommunication networks, the problem of the investments allocation has become the main stumbling block for the majority of mobile operators. This paper focuses on the development of theoretical model that will determine the optimal investments in infrastructure for MNOs given the spillover effect and the fixed coverage of firms. As infrastructure I assume the new-generation wireless network - LTE and the presence of spillover is explained by roaming agreements. It is thus shown that firms are always better off under collusion, however the level of investment compared to the case of no collusion depends on the relative values of spillover parameter – roaming quality and firms coverage. For sufficiently high coverage at any degree of roaming quality investments fall if firms cooperate. The welfare also depends on coverage and the spillover effect. The regulator that cannot prevent firms from colluding will always set highest possible value of roaming quality; otherwise the exact value will depend on coverage of firms.