Operator Collusion and Market Regulation Policies for Wireless Spectrum Management

Abstract

The liberalization of wireless communication services markets and the subsequent competition among network operators, is expected to foster optimal utilization of the scarce wireless spectrum and ensure the provision of cost-efficient services to users. However, such markets may function inefficiently due to collusion of operators which yields a de-facto monopoly. Although it is illegal and detrimental to the users, creation of such cartels arises often in the form of implicit price fixing. In this paper, we consider a general such market where a set of operators sell communication services to a large population of users. We use an evolutionary game model to capture the user dynamics in selecting operators, under limited information about the actual service quality, and we analyze the anticipated interaction of the operators using coalitional game theory. We define a coalition formation game in order to rigorously study the conditions that render monopolistic or oligopolistic markets stable under different notions of coalition stability. We also provide direct and indirect regulation methods, such as setting price upper bounds or allocating different amounts of spectrum, in order to discourage undesirable equilibriums. Our approach provides intuitions about collusion strategies, as well as on directions for identifying and preventing them.