Political Determinants of Competition in the Mobile Telecommunication Industry

We study how political factors can shape competition in the mobile telecommunication sector. We show that the way a government designs the rules of the game has an impact on concentration, competition, and prices. Pro-competition rules reduce prices, but do not hurt the quality of services or investments. More democratic governments tend to design rule that are more pro-competition, while more politically connected operators are able to distort the rules in their favor, restricting competition. Government intervention has large redistributive effects: U.S. consumers would gain $65bn ($44bn) a year if U.S. mobile service prices were in line with Germany (Denmark).