The relationship between investment and competition in wireless industry

What is it about?

The relationship between competition and investment in wireless industry is inverted U shaped. The investment maximising intensity ofcompetition is reached when operators' gross profits represent 37 or 40 per cent of their revenues.

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Why is it important?

Many people believe that the fiercer is the competition, the higher is the investment. This paper shows that this vision is not always true in wireless industry. This is only true up to a point. When operators' gross profit margin is above 40 per cent, strengthening competition tends to increase investment and when operators' gross profit margin is under 37 per cent, strengthening competition tends to reduce investment. It is important for sectoral regulatory authorities to take this into account to sustain investment.