Does public policy designed to promote market competition indeed achieve the intended consequence? Using the wireless industry as a testing field, this paper examines this question by focusing on the impact of mobile number portability (MNP) regulation on competition. We first construct a switching-costs model in which market growth rate and initial market structure are two salient industry characteristics. Guided by the analytical predictions, we analyze quarterly panel data of 218 major wireless operators in 52 countries from 2003-2009. We find relative market share gains for small firms under MNP, especially in markets with higher growth rate and lower concentration. Yet, surprisingly, large firms still manage to enjoy greater profit after MNP. We interpret the conundrum of “market share convergence” and “profit divergence” with customer base composition. Our method of analyzing asymmetric MNP effect in a cross-country context is applicable to public policy analysis in other industries.
Wei, Xiahua and Zhu, Kevin, "PRO-COMPETITION PUBLIC POLICY IN NETWORK MARKETS WITH SWITCHING COSTS: EVIDENCE FROM “MOBILE NUMBER PORTABILITY” IN WIRELESS TELECOMMUNICATIONS INDUSTRY" (2010). ICIS 2010 Proceedings. 259.