How to Design a Common Telecom Infrastructure for Competitors to be Individually Rational and Collectively Optimal

Abstract

The fast development of mobile networks calls for the massive consumption of materials, land, and energy in building and maintaining infrastructures, which is always intensified by the repetitive constructions of competing network operators. To reduce the resource consumption for social benefit, one business solution, implemented in the Chinese telecom industry, is forming a joint venture responsible for building and maintaining common infrastructures. The novelty of this practice is that the joint venture is shared by the competing operators who also rent infrastructures from the joint venture. We note that such a solution can be potentially generalized to other industries for reducing resource consumption. However, before generalization, an understanding of the pros and cons from the economic perspective of the business model is urgently needed. In this paper, we study this business model from a game theoretic approach. Our results show that if we properly regulate the joint venture, the market can converge to equilibriums with desirable properties which cannot be achieved without the joint venture. Furthermore, we also study the investment reduction in the presence of the joint venture. Our numerical results show that under a moderate user density, the total investment on the infrastructures can be significantly reduced.