Technological investment games among wireless telecommunications service providers

With the development of new technologies in a competitive context, infrastructure investment and licence purchase as well as existing technology maintenance are crucial questions for current and emerging operators. This paper presents a three-level game analysing this problem. At the highest level, the operators decide on which technologies to invest, given that some may already own licences or infrastructures. We limit ourselves to the realistic case where technologies are 3G, WiFi and WiMAX. At the intermediate level, with that set of operated technologies fixed, operators determine their service price. Finally, at the lowest level, customers choose their provider depending on the best combination of price and available quality of service. At each level, the best decision of actors depends on the actions of others, the interactions hence requiring to be studied as a (non-cooperative) game. The model is analysed by backward induction, meaning that decisions at a certain level depend on the equilibria reached at the lower levels. Different real-life cost scenarios are studied. Our model aims at helping both the operators to make their final decision on technological investments, and the regulator to determine an appropriate licence fee range for a better competition among providers. Copyright (C) 2011 John Wiley & Sons, Ltd.