Competition for subscribers between mobile operators sharing a limited resource

Radio spectrum allocation is essential to the provision of mobile communication services. The spectrum is a finite resource and can accomodate a limited number of simultaneous users at one time. Due to this scarcity, allocating traditional mobile licenses to new mobile operators is unrealizable and new entrants should bargain access to the networks of the incumbents. In this article, a mobile network operator (MNO) shares his finite network resource with a mobile virtual network operator (MVNO) lacking the infrastructure. This latter has the opportunity to invest in advertising/content to compensate for her quality of service degradation. We introduce competition between both providers on consumers and prove that the associated three-level game has a unique Nash equilibrium in the retail prices. Besides the MNO should rather use a bundle based pricing approach while the MVNO would prefer linear pricing. Finally the introduction of file-sharing platforms offering free-downloadable programs might increase both providers' revenues.