Quality Competition in Mobile Telecommunications: Evidence from Connecticut

Patrick Sun

No 14-05, Working Papers from NET Institute

Abstract: Signal quality is a significant contributor to the overall quality of wireless telephone service, which competitive analyses often overlooks. To understand the competitive impact of signal quality investment on further consolidation in this industry, I use a market research survey of choice of wireless service provider and a government database on transmission base stations in Connecticut. Dropped call rates and local coverage improve as base station density increases, so I treat base station density as an endogenous product characteristic and relate it to the local value of wireless services. I find a marginal base station contributes a median 0.15% increase in own market share and a median 0.03% decrease in rival market share. Marginal base station costs are implied to be substantial, so if these costs can be effectively reduced through network integration after a merger, the merging firms and consumers can both benefit through increased base station provision. If such integration is not possible, consumers lose due to either a loss in variety of products or reduced incentives of merged firms to produce quality. These results suggest that merger review must pay careful attention to the potential for network integration in wireless and related industries.

Keywords: quality competition; merger analysis; telecommunications. (search for similar items in EconPapers)
JEL-codes: L15 L40 L96 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2014-09
New Economics Papers: this item is included in nep-com, nep-cse, nep-ict and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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