Pricing mechanism for interconnection between phone operators and virtual mobile VoIP operators

Lately software based virtual mobile voice over Internet Protocol (VMVoIP) services have become available to end-users which may endanger profit of regular telephone operators from phone calls. In this situation, telephone operators should decide on a proper mechanism for interconnection with such VMVoIP operators which secures mutual benefit of both operators. In this paper, we study both monopolistic and oligopolistic markets of VMVoIP in which a single VMVoIP and several VMVoIP operators available in the market respectively. We model the interaction among a phone operator, VMVoIP operators and end-users as a leader-follower dynamic game and find a sub-game perfect Nash equilibrium (SPNE) for the game. The SPNE shows the phone operator’s best pricing strategy (i.e., wholesale price for VMVoIP operators and retail price for end-users) and its best decision on the interconnection with VMVoIP operators. We further study economic interpretation of the SPNE. We show that in specific end-users’ demands, the phone operator may increase its total profit by allowing the interconnection and taking right price discrimination strategy.