econstor Make Your Publications Visible.

Transcription

1 econstor Make Your Publcatons Vsble. A Servce of Wrtschaft Centre zbwlebnz-informatonszentrum Economcs Le, Hadong; Song, Luona; Lv, Tngje; Chen, Xa Conference Paper Economc Analyss and Recommendaton of Moble Vrtual Operaton Market n Chna 4th Internatonal Telecommuncatons Socety (ITS) Asa-Pacfc Regonal Conference: "Mappng ICT nto Transformaton for the Next Informaton Socety", Kyoto, Japan, June, 207 Provded n Cooperaton wth: Internatonal Telecommuncatons Socety (ITS) Suggested Ctaton: Le, Hadong; Song, Luona; Lv, Tngje; Chen, Xa (207) : Economc Analyss and Recommendaton of Moble Vrtual Operaton Market n Chna, 4th Internatonal Telecommuncatons Socety (ITS) Asa-Pacfc Regonal Conference: "Mappng ICT nto Transformaton for the Next Informaton Socety", Kyoto, Japan, June, 207 Ths Verson s avalable at: Standard-Nutzungsbedngungen: De Dokumente auf EconStor dürfen zu egenen wssenschaftlchen Zwecken und zum Prvatgebrauch gespechert und kopert werden. Se dürfen de Dokumente ncht für öffentlche oder kommerzelle Zwecke vervelfältgen, öffentlch ausstellen, öffentlch zugänglch machen, vertreben oder anderwetg nutzen. Sofern de Verfasser de Dokumente unter Open-Content-Lzenzen (nsbesondere CC-Lzenzen) zur Verfügung gestellt haben sollten, gelten abwechend von desen Nutzungsbedngungen de n der dort genannten Lzenz gewährten Nutzungsrechte. Terms of use: Documents n EconStor may be saved and coped for your personal and scholarly purposes. You are not to copy documents for publc or commercal purposes, to exhbt the documents publcly, to make them publcly avalable on the nternet, or to dstrbute or otherwse use the documents n publc. If the documents have been made avalable under an Open Content Lcence (especally Creatve Commons Lcences), you may exercse further usage rghts as specfed n the ndcated lcence.

2 Economc Analyss and Recommendaton of Moble Vrtual Operaton Market n Chna Hadong Le * Luona Song 2 Tngje Lv 3 Xa Chen 4. School of Economcs and Management, Bejng Unversty of Posts and Telecommuncatons, Bejng, Chna @qq.com School of Economcs and Management, Bejng Unversty of Posts and Telecommuncatons, Bejng, Chna 3. School of Economcs and Management, Bejng Unversty of Posts and Telecommuncatons, Bejng, Chna 4. School of Economcs and Management, Bejng Unversty of Posts and Telecommuncatons, Bejng, Chna Abstract: Wth the contnuous development and teraton of telecommuncaton technology, the users requrements of the qualty and servce have ncreased dogmatcally. In order to meet the dverse and personalzed consumer demands, vrtual network operators came nto beng. In 203, Chna offcally launched moble wholesale busness plot whch symbolzed the arrval of vrtual operaton n Chna market. Ths paper explores the economc effect of Chna vrtual operaton from the perspectve of consumer surplus and socal welfare accordng to the data of data servce from three years after the ntroducton of vrtual operaton. The results show that, after ntroducng vrtual operators nto Chna market, consumer surplus and socal welfare have both enhanced. Moreover, comparng wth the wholesale mode, smple vrtual operaton mode could provde greater consumer surplus and socal welfare. At the same tme, MVNO wll get more profts. In the early stage, MVNO s n a weak poston, but the polcy of smple vrtual operaton mode reflects strong government support. Fnally, ths paper puts forward some recommendatons based on the result of the mathematcal model and Chna s natonal condtons. Keywords: Vrtual Operaton; Moble Wholesale; Consumer Surplus; Socal Welfare. Introducton In December 26, 203, when Chna offcally launched moble wholesale busness plot, the arrval of the era of Chna's vrtual operaton was wtnessed. By the end of 206, Chna s moble wholesale busness plot has entered ts fourth year wth more than 40 moble vrtual network operators (MVNO). The number of moble wholesale users have exceeded 43 mllon, whch accountng for nearly 3% of the country's whole moble users. However, the moble wholesale offcal lcense whch should be released after the end of two-year plot s stll stagnant to release. Meanwhle, the moble vrtual operaton plot has faled acheved ts desred results because the moble vrtual network operators performance s unsatsfactory. The moble vrtual network operators are plagued by many problems, such as the rampant telecommuncatons fraud (mostly caused from the code of vrtual operators), the lack of the code number resources and the fuzzy proft model. In contrast, snce Sense company(norway) carred out the vrtual operatons busness n 990 for the frst tme, vrtual operaton has been generally recognzed and mplemented n Europe countres, such as the Unted Kngdom, Sweden, Swtzerland, Norway and so on. The Brtsh Vrgn Moble and many other well-known vrtual operators were set up at that tme. Same foregn governments have adopted forcng Moble Network Operators (MNO) to open ther network to Moble Vrtual Network Operator (MVNO), such as Korea, Norway and Sweden. Whle others have chosen to force MNO and MVNO to set up jont ventures, such as the Unted Kngdom. These two ways have both promoted the telecommuncatons market open to vrtual operators. Thus, vrtual operators can leverage ther own advantages to provde a more vared nformaton products and servces to further meet users demands. The ntenton of Chna's moble wholesale plot s to learn from the successful experence of open vrtual operatons n the Western developed countres, and through the ntroducton of vrtual operators to stmulate the compettveness of the telecommuncatons ndustry, and further mprove the qualty of nformaton products and servces. But after three years operaton, plot dd not acheve the desred results. In vew of the current stuaton, the domestc research mostly amed at the polcy, market, feasblty and even the key technology of vrtual operaton. Junhao Yang (200) analyzed the maturty and feasblty of domestc vrtual operaton market through the comparson of the development process of foregn vrtual operaton market, and ultmately recommended that Chna's vrtual operaton market s mature. What s more, he assumed that the government needs to legslate to protect the market and strengthen the state-owned captal control and so on[]. Accordng to the analyss of the current stuaton of Chna's telecommuncaton ndustry, Sh Pu (2003) ponted out the necessty of ntroducng vrtual operaton, and thought that the cooperaton between vrtual operators and basc operators was the best choce [2]. Danyan Fang (203) ntroduced three man modes of MVNO and two typcal models MOCN and GWCN n the full vrtual operaton mode, and thus analyzed development strategy of MVNO. Fnally, he proposed several recommendatons on the sub-bllng, number assgnment, Internatonal roamng and other key techncal ssues [3]. There s no analyss of the cost-effectveness after the ntroducton of vrtual operatons n Chna, but the analyss of vrtual operatons abroad s wdely used. Lvo Crcell (202) provded an economc analyss by establshng a compettve model between MNO and MVNO, and concluded that a reducton n moble termnal rates would lead to competton among operators, force each operator to lower retal prces and mprove consumer welfare. At the same tme, the cooperaton strategy of MVNO and FNO not only can reduce the retal prce, but also can weaken the MNO [4]. Byung Woon Km (2007) predcted the effect of ntroducng vrtual operatons from the perspectve of consumer surplus and socal welfare by constructng a demand-prce model. Then he proposed that f the access fee s costly or ncremental, no matter what type of ntroducton polcy, the ntroducton of vrtual operators would brng postve socal benefts [5]. Duk Hee Lee (2006) estmated the consumer surplus of the Korean moble phone servce market by buldng a model, and he assumed that faclty-based competton polcy and the reducton of access fees such as termnal subsdes could effectvely promote the popularzaton of moble communcaton servces n Korea [6]. Based on the comparson of before and after the ntroducton of vrtual operatons, ths paper bulds a demand-prce model and carres out an economc analyss accordng to the network operator's data servce data on the telecommuncatons market (network operator s data shows that data servces and other non-lngustc busness ncome has more than voce busness ncome, The tradtonal voce call market s gradually shrnkng).through the economc analyss, the change of cost and proft of each operator are estmated. The authors fnd out the crux of the vrtual operaton market n Chna and put forward the correspondng polcy suggestons. 2. Overvew of Vrtual Operaton 2. Vrtual Operaton

3 The telecommuncaton regulatory agency n the UK defnes MVNO as an organzaton whch provdes moble telephone servce to ts customers, but does not have an allocaton of spectrum. The Internatonal Telecommuncatons Unon (ITU) defnes t as "a servce provder that provdes moble network servces to users wthout ther own frequency and government-ssued lcenses". Moreover, MVNO s generally defned n Chna as "a servce provder that provdes dversfed and personalzed telecommuncatons servces through rentng network lnes and other hardware resources from tradtonal telecommuncaton operators, accordng to the demand of the market and the user ". Accordng to the defnton of MVNO, the degree of dependence on MNO and ther own resources to operate moble networks, MVNO can generally be dvded nto three categores whch are wholesale MVNO, smple MVNO and FULL MVNO, as shown n Fgure. Fgure : Classfcaton of vrtual operators Wholesale MVNO refers to the most basc vrtual operators who wholesale code number resources and communcatons servces from the MNO, establsh ndependent brands, marketng channels and customer servce system, and provde servces for consumers through personalzed nformaton products and servces. Wholesale MVNO reles on MNO to provde code number resources and SIM cards, and the wholesale prce also depends on the MNO, so ts ablty to provde dfferentated servces s relatvely weak. But meanwhle, the access threshold to t s relatvely lower, whch means that Wholesale MVNO s sutable for the new entrants from other ndustres. At present, MVNO n Chna are generally wholesale MVNO, and foregn representatve companes of wholesale MVNO s the French Carrefour. Smple MVNO has ts own telecommuncaton lne equpment (swtchng equpment) and SIM card on the bass of wholesale MVNO, so smple MVNO can ndependently allocate number and provde personalzed value-added telecommuncaton servces based on ts own servce platform. But on the other hand, smple MVNO stll need to rely on moble operators to provde communcatons and data servces. Compared to the wholesale MVNO, the autonomy and provdng dfferentated servce capabltes of smple MVNO has mproved. The representatve company of smple MVNO s the Brtsh Vrgn. Full MVNO has the greatest ndependence n all three MVNO Modes. Full MVNO only rents the basc network from MNO. It owns SIM card and code number resources, and t can provdes ndependent communcaton and data servces through self-bult exchange equpment and transmsson equpment. So full MVNO has a hgh degree of autonomy n prcng, servce development and proftablty. Full MVNO has all the communcaton data of ts users. Thus full MVNO has enough capacty to provde dfferentated, personalzed servce and form an effectve competton wth the MNO. However, there s hgher access threshold to t. Full vrtual operaton mode has hgher requrements n the enterprse's captal, techncal level, telecommuncatons experence and other aspects, whch means that full MVNO s sutable for enterprses wth experence n telecommuncaton operatons. The representatve company s Italy Post Moble. Therefore, accordng to the above classfcaton of the MVNO, the open mode of the vrtual operaton market can also be dvded nto three categores: wholesale mode, smple vrtual operaton mode and full vrtual operaton mode. 2.2 The Development of Vrtual Operaton n Chna On November 0, 200, Chna formally joned the WTO organzaton. Meanwhle, the Chnese government promsed to gradually open the domestc telecommuncatons market. On December 26, 203, because of the requrements of the State Councl "Several opnons on encouragng and gudng the healthy development of prvate nvestment", and n order to further open the telecommuncatons market, promote prvate captal to enter and promote the vtalty compettveness of the telecommuncatons market, the Mnstry of Industry and Informaton Technology gave the enterprses the approval of frst batch of moble communcatons resale busness plot. By the end of 206, Chna s moble wholesale busness plot has entered ts fourth year, wth more than 40 MVNO, and the number of users of MVNO have exceeded 43 mllon, whch accountng for nearly 3% of the country's whole moble users. In these 42 companes, there are companes have more than 00 mllon users, of whch the largest enterprses have more than 8 mllon users. But MVNO have also exposed a lot of problems, such as the rampant telecommuncatons fraud (mostly caused from the code of vrtual operators), the lack of the code resources and the fuzzy proft mode. MVNO generally dffcult to acheve proftablty (except for the Huajshje, m moble, Al moble and other sx, whch recently announced to acheve proftablty). What s more, the moble wholesale offcal lcense whch should be released after the end of two-year plot s stll stagnant to release. 3. Model and Result 3. Model Wth the start of the vrtual operaton plot n 203, MVNO entered the telecommuncatons market wth takng prce competton strategy for gettng users from the three domnate network operators, whch became one of the mportant reasons for the declne of the telecommuncatons market nformaton products prces. However, as Chna took the most basc wholesale model to open vrtual operaton market, the MVNO n the market became both the customer and the compettor of the MNO. In a word,

4 MVNO n wholesale mode not only s subject to the constrants of MNO, such as crtczng zero to hang upsde down and other ssues, but also not have the suffcent ablty to provde dfferentated servces. In contrast, f the government takng the smple vrtual operaton model, the constrants of the MVNO could be further released, the MVNO could set up jont ventures wth operators, and then could change the relatonshp of both the customer and the compettors wth MNO. Thus, the MVNO could have a greater space for prce cuts, and provde dfferentated servces and value-added servces, whch wll be more conducve to promotng the compettveness of the telecommuncatons market. Moreover, t also can avod the nformaton securty and other rsks under the full vrtual operaton mode. So, ths paper sets mplement smple vrtual operaton mode as comparatve polcy, to compare the effects of wholesale mode. After enterng the telecommuncaton market, the MVNO mprove consumer surplus for consumers by cuttng the prce of data servce. Thus the effectveness of moble vrtual operaton plot polcy can be assessed by consumer surplus. Table : Polcy and mode Polcy Polcy (beng mplemented) Polcy 2 Mode wholesale mode smple vrtual operaton mode Typcal operatng mode Wholesale Set up a jont venture Accordng to the data from Natonal Bureau of Statstcs, the cost of voce calls has declned from 0.3 to 0.5 yuan per mnute, but the total moble voce calls has declned from bllon mnutes to bllon mnutes from 203 to 206, whch ndcatng that there s a weak replacement relatonshp between the emergng data servces and voce call servces n the current telecommuncatons market. Wth the development of data servces, voce call market s gradually shrnkng. Therefore, ths paper manly from the perspectve of data servces to calculated the consumer surplus of the telecommuncatons ndustry, and for convenence and smplcty of estmaton procedure, the assumpton was made that the market demand functon of data servce s an ordnary demand curve wth a log-lnear form whch s affected by call charge (p), and the sze of the network (N). Q 2 = ep N () Where e s the demand-prce factor. The consumer surplus s the area of the shaded part of the prce from p 0 to p, as shown n Fgure 2. So t can be calculated by the formula (2). Δ CS = = = p0 p p0 p 2 p 2 0 en p + dp p Q( p) dp ep N dp 2 en + + = ( p0 p ) (2) Fgure 2 consumer surplus model As for polcy 2, snce the MVNO have room for further prce reducton, ths paper assumed that the operator's prce s p n, then the prce of the vrtual operator s p vn = ( r ) p, then the average prce of the data servce market s: n p = spn + ( s) p (3) vn Where s s the market share of MVNO under the smple vrtual operaton mode. After the ntroducton of the MVNO, the proft (proft-cost) change of the MNO and the MVNO s gven by the formula (4) (5) respectvely. If Δ PS 0 >, t means that the base operator's revenue ncreases after the ntroducton of the vrtual operator. If Δ PS v > 0, then means that the MVNO enterng the telecommuncatons market could be proftable. The MNO n Chna have most of the telecommuncatons nfrastructure, and as for the rest of nfrastructure that rented from the tower company, MNO pad t accordng to the number of tower and not assocated wth busness volume. Therefore, ths paper assumed that after the ntroducton of vrtual operatons, the MNO's basc network access costs has not changed.

5 Δ PS =ΔTR ΔTC =-s EN + ( s ) PQ P0Q 0 + Rvn ( Δ Cn +ΔCvn) Where E s the users average monthly rent of the MNO; N s the sze of the moble user; R vn s the benefts of MNO from MVNO; ΔC n referrng to the operator's nterconnecton cost change value; ΔC vn s the market sales and other cost changes of MNO. Δ PSv = R C (5) =sen+spq Cvn Cvm Where C vn s the network access cost of MVNO; C vm s the market, sales, operatng stes and other expenses of MVNO. In the current polcy (polcy ) of wholesale mode, the MVNO drectly dstrbutes the telecommuncaton product from the MNO, and then Δ PS could be gven drectly by the formula (4 '). Δ PS =ΔTR ΔTC =-(s EN + ( a)s PQ ) + ( s ) PQ P Q ΔC Δ PS = R C v 0 0 vn =s EN+as PQ C vm Where a s the wholesale dscount based on the retal prce. Therefore, after the ntroducton of the MVNO, the change n the total socal welfare s derved from the formula (6). Δ W =Δ CS+Δ PS +Δ PS (6) v (4) (4 ) (5 ) 3.2 Data 3.2. Data Traffc Prce Before vrtual operaton plot mplemented n 203, data traffc prce of the three major MNO was generally 0.3 Yuan each MB. After three years later of the mplementaton of polcy plot, data traffc prce of the three major MNO s seen n Table 2. Ths paper assumed that Chna Moble, Chna Uncom and Chna Telecom rato of 5: 3: 2, Chna Moble nternal prce rato of 7: 2:, Chna Uncom nternal prce rato of 7: 3, and Chna Telecom nternal prce rato of 8: 2. Table 2:Data traffc prce of MNO(Yuan/MB) Chna Moble Chna Uncom Chna Telecom 0-00MB >00MB >GB 0-37MB >37MB 0-00MB >00MB Data source: offcal webste of each MNO. In December 206, data traffc prce of the man MVNO are seen n Table 3. Snal moble, D.moble ths two MVNO s users have broken 5 mllon, both of whch rank n the top. Table 3:Data traffc prce of man MVNO(Yuan/MB) MVNO Type Charge Rato Man card 0. Snal 60 Man card 0.2 4G enjoyed card D.moble yuan 0.2 Al Telecom 38-77yuan yuan 0.5 >27yuan 0.3 Great Wall Moble G Moble Tellng Moble JD Moble Sunng Moble Data source: offcal webste of each MVNO As for the polcy 2, the MVNO have more space and means to lower prces to attract users and provde dfferentated servces, so compared to the polcy, the MVNO's prce of data traffc s lower, and the MNO n order to retan users wll reduce the prce accordngly. Km (2007) assumed that the prce of the MVNO s reduced by 0%. Ths paper also assumed that the data traffc prce of the MNO s P n 2 = (-r ) P n ; the data traffc prce of the MVNO s P vn 2 = (-r ) P n 2, where r s 0% User Scale Accordng to the data released by the Mnstry of Industry and Informaton Technology, at the end of 203, Chna's moble

6 phone users was N 0=.229*0 9, and at the end of 206 the number of moble phone users n Chna was N =.306*0 9. Moble phone penetraton rate reached 95.5 / 00, whch means ncremental market of t s close to saturaton Coeffcent For the sake of smplcty, ths paper assumed that =. The Mnstry of Industry and Informaton Technology announced 2 the 203 and 205 market sze (moble users sze) was N 0=.229*0 9, N =.306*0 9 respectvely, and the data access flow was Q 0=.35*0 2 MB, Q =4.29*0 2 MB respectvely. So, and e can be calculated by the formula (7) and (8). QN 0 = log P 0 QN P 0 (7) QN 0 log P0 QN P e= Q /( N P ) (8) Fnally, =-4.09,e= Market Share At the end of December 206, under the polcy model, the number of the user of MVNO has reached 43 mllon (data source: Mnstry of Industry and Communcatons Development Dvson), and the market shares of MVNO reached 3%. If mplementng the polcy 2, as the MVNO have greater room to lower prce, MVNO wll further ncrease the sze of the user. Accordng to foregn experence, Vrgn Moble as a typcal smple MVNO, n 999 after the establshment of two years, the market shares of t reached 3.22% (Vrgn Moble, 2002[9]). The Brtsh Telecommuncatons Authorty has announced that the number of vrtual operators has 7% of the total number of moble subscrbers (Oftel, 200[0]). Therefore, ths paper assumes that f polcy 2 s mplemented, the market share of MVNO s S = 5% Network Access and Marketng Cost The cost of MVNO manly nclude the network access cost, as well as self-bult ste operatng costs and market costs and so on. "Moble communcatons resale busness plot program" clearly stpulates that n terms of prce, the wholesale prce level that MNO set should be lower than mnmum retal prce level n ts local publc market. But the specfc dscount amount was decded by the MNO and MVNO together. Ths paper assumes that the dscount amount m = 60%. Chna Moble s sales and marketng costs was accounted for 9% of operatng ncome, Chna Uncom accounted for 5%, and Chna Telecom accounted for 4.4%. Therefore, ths paper assumed that the MVNO's market cost s accounts for 4% of the operatng ncome, and other costs nclude webste operatons, customer servce and other costs s accounted for 6% of operatng ncome. 3.4 Result The consumer surplus, producer surplus and socal welfare under the two polces was calculated, as shown n Table 4 below. Table 4: Consumer surplus (Hundred mllon yuan) Polcy Consumer surplus Proft change of MNO Proft change of MVNO Producer surplus Socal welfare Polcy Polcy Table 4 shows that, after three years of the mplementaton of polcy, consumer surplus reached bllon yuan, and socal welfare reached bllon yuan, ndcatng that the ntroducton of MVNO s both benefcal for consumers and the communty. Whle the MVNO's proft changng value s bllon yuan, ndcatng that the MVNO could be proftable and would have a better earnngs prospects. The result of the comparson polcy showed that under the mplementaton of polcy 2, the consumer surplus compared to under the polcy ncreased 9.84 bllon yuan. MVNO proft change was rased to bllon yuan, and socal welfare had a small ncrease too. The results showed that, after the ntroducton of vrtual operators, consumer surplus and socal welfare are both enhanced, and compared to the wholesale mode, smple vrtual operaton mode can brng greater consumer surplus and socal welfare. At the same tme, MVNO can get more profts. In the early stage, MVNO are n a weak poston, and the polcy of smple vrtual operaton mode reflect the strong support of the government to the MVNO, and t s more conducve to lower the prce, ncrease the speed and the compettve vgor, promote the upgradng and development of the telecommuncatons ndustry n transton, whch wll be more conducve to the early development of vrtual operators. It should be noted that the proftablty change of the MNO under both polces s postve, ndcatng that after the ntroducton of MVNO, the operator's proft s ncreased. Ths s manly because the data servce s emergng servces, ncremental market of t s stll very large. Lower prces wll brng a substantal ncrease n the use, so as to brng postve proft changes to the MNO. But n fact, due to the substtuton of data servces for voce servces, the ncrease n data traffc revenue at the same tme wll reduce the MNO's voce busness revenue, and excessve data traffc usage wll also cause network congeston, and thereby all of t wll ncrease the MNO's nvestment and operatng costs. So n the absence of competton, MNO don t have much moton to take the ntatve to reduce the data flow prce, whch do not conflct wth the results of ths model. 4. Summary and Concluson As for three modes of open vrtual operaton market, wholesale mode s relatvely conservatve. The MVNO s equvalent to the wholesale agents, whch have many lmtatons n the development process. Compared to wholesale mode, smple vrtual operaton mode could ncrease the vtalty and potental of MVNO, as the degree of openness has ncreased. MVNO under full vrtual operaton mode could be seen as the MNO wthout any nfrastructure, whch have the bggest ntatve. But under ths mode, MVNO have all communcaton data and would be dffcult to guarantee the safety of natonal telecommuncatons. In smple vrtual operaton mode, data and core resources of basc network s are stll controlled by domnant network

7 operators, whch could avod the securty problem of telecommuncaton data, reduce restrcton and promote the vtalty of MVNO. Fnally, ths paper puts forward some recommendatons based on the results of the mode and Chna s natonal condtons. For government, t should further loosen control n the telecommuncaton ndustry. Government should open moble vrtual operaton market wth smple vrtual operaton mode, and encourage the MVNO to set up a jont venture company wth MNO, n order to carry out a varety of nnovatve telecommuncatons value-added servces and promote the telecommuncatons ndustry competton. At the same tme, smple vrtual operaton model s also down compatble. As there s only three MNO n Chna, a few jont ventures company wll be set up, so, many of MVNO stll need to take the wholesale mode. Therefore, the government needs to carry out the regulaton or legslaton of the vrtual operators qualfcaton, sublease fees and other ssues n detal. In terms of MVNO s qualfcaton, government can take way to gradually open: frst open to prvate captal, so as to accumulate experence; and then gradually open to Hong Kong, Macao and Tawan captal; fnally consder openng to foregn captal, untl the vrtual operaton market s fully mature and the relevant laws and regulatons are perfect. Under the smple vrtual operaton mode, the domestc MVNO can take strategy of establshng a jont venture company wth the nfrastructure network operators to carry out the benefts of bundlng, thus MVNO could avod that t s both customers and compettors of MNO n the moble wholesale mode. Vrgn Moble s the world's most famous and most successful MVNO whch founded n 999. It was a jont venture wth T-moble (Deutsche Telekom), and contnued to use ts strategy to set up a jont venture company wth local nfrastructure network operators to ensure localzaton and complementary market segments. MVNO as new entrant of the telecommuncatons ndustry, need to take good advantage of ther own advantages to provde personalzed servces and focus on market segments. Each operator of three domnant network operators has more than one hundred mllon users, and t s dffcult for them to focus on a specfc market segment and provde specal servces. That s exactly what the advantages of MVNO, n alluson to ths huge segment market, MVNO could provde specal servces for subdvson crowd and do accurate and personalzed marketng. Acknowledgements Ths paper was supported by Major Program of the Natonal Socal Scence Foundaton of Chna under Grant No.5ZDB54, Natonal Basc Research Program of Chna (973 Program) under Grant No. 202CB35805, and Natonal Natural Scence Foundaton of Chna under Grant No Reference []. Yang J H, Ja-Yn Q I, Huang Y J, et al. The Feasblty Analyss of Openng of Natonal Vrtual Operaton Market [J]. Journal of Bejng Unversty of Posts & Telecommuncatons, 200. [2]. Sh Pu, Lzhong Tong. Research on vrtual operaton of Chna's telecommuncatons ndustry [J]. Journal of Schuan Unversty (Phlosophy and Socal Scences Edton), 2003(5):9-3. [3]. Danyan Fang, Bao Sun. Research on the mode, development strategy and key technologes of moble vrtual operaton [J]. Informaton Communcaton Technology, 203(4): [4]. Crcell L, Grmald M, Ghron N L. The mpact of regulatng moble termnaton rates and MNO MVNO relatonshps on retal prces [J]. Telecommuncatons Polcy, 202, 36():-2. [5]. Km B W, Seol S H. Economc analyss of the ntroducton of the MVNO system and ts major mplcatons for optmal polcy decsons n Korea [J]. Telecommuncatons Polcy, 2007, 3(5): [6]. Lee D H, Dong H L. Estmatng consumer surplus n the moble telecommuncatons market: The case of Korea [J]. Telecommuncatons Polcy, 2006, 30(0 ): [7]. Corrocher N, Laso L. Dversfcaton strateges n network-based servces: The case of moble vrtual network operators [J]. Telecommuncatons Polcy, 203, 37():0-23. [8]. Song J D. Varous wholesale prce equlbra for moble vrtual network operators [J]. Telecommuncatons Polcy, 200, 34(0): [9]. Vrgn Moble. (2002). Vrgn moble attracts 2 mllon customers n record tme, October 2. London: Vrgn Moble. / [0]. Oftel. (200). Effectve competton revew: Moble. London: Oftel. []. Kalmus P, Wethaus L. On the compettve effects of moble vrtual network operators [J]. Telecommuncatons Polcy, 200, 34(5-6): [2]. Shn D H. MVNO servces: Polcy mplcatons for promotng MVNO dffuson [J]. Telecommuncatons Polcy, 200, 34(0): [3]. Ulset S. Moble vrtual network operators: a strategc transacton cost analyss of prelmnary experences [J]. Telecommuncatons Polcy, 2002, 26(9-0): [4]. Garrdo E, Whalley J. Competton n wholesale markets: Do MNOs compete to host MVNOs? [J]. Telecommuncatons Polcy, 203, 37():24-4.