Mobile telecommunication companies’ investment and pricing strategies for content service

Abstract

Several mobile telecommunication companies (MTCs), such as AT&T, Verizon, and China Mobile, are investing in content services to drive continued growth as the telecom industry has become saturated. In this study, we investigate the competition between two MTCs, one of which (MTC 1) provides both data and content services, while the other (MTC 2) provides only data services. We propose a two-stage game-theoretic model to analyze the two MTCs' optimal pricing strategies for data service and content service as well as the investment strategy for the content service. Our analysis reveals that a higher value of value-added service offered by MTC 1 will incentivize it to raise its subscription fee for the content service and induce both MTCs to reduce the prices of their data services, which results in an increased demand for the content service and a decreased demand for MTC 2's data service. As MTC 1 invests further in the quality of the content service, it would benefit from increasing the subscription fee for the content service, and the two MTCs should increase the subscription fee for the data service. However, compared to the decisions in the scenario where MTC 1 does not provide content service, the provision of this service by MTC 1 leads to a lower subscription fee for the two MTCs' data services, an increase in the demand for MTC 1's data service, and a decrease in the demand for MTC 2's data service. These findings reveal that regularly monitoring market competition, as well as adjusting pricing strategies based on market scenarios and the value of services, can enhance competitiveness and long-term profitability for MTCs.