Entry in telecommunication : customer loyalty, price sensitivity and access prices

Abstract

Telecommunications is an industry characterised by heavy investments in infrastructure. Historically, one firm has typically been granted a national monopoly. Recently, competition has been opened up. Entrants have been allowed to use the existing network infrastructure at a regulated access price. We study the rivalry between incumbents and entrants under two distinct types of entry: Newcomer entry and reciprocal entry. The latter refers to the situation where two neighbouring "old monopolies" enter each other's markets. A question that is given special attention is when we would expect market sharing type collusion in the latter case.