Economics of Technological Games among Telecommunication Service Providers

The telecommunication world keeps evolving, with the development of new technologies, and operators have to wonder if investing in the costly infrastructures and potential licenses as well as maintaining existing technologies is worthy. This has to be investigated in a competitive context. We propose in this paper to model and analyze a three-level game between two operators. At the highest level, operators decide which technology to implement, possibilities being here 3G, WiFi and WiMAX. At the intermediate level, they fix their service price, while at the lowest level, customers choose their provider depending on price and quality of service. The model is analyzed by backward induction, where decisions at a level depend on the equilibria at the lower levels. Different real-life cost scenarios are studied, depending on whether or not operators already own the infrastructures and licenses: our model should help understanding their final decision.