Study On The Vertical Relationship Of Upper And Lower Stream Between Telecom Operators And Telecom Service Providers

With the trend of mobile Internet, as well as the rising in acceptances and demands for data services of telecom consumers, telecommunication industry is enduring a profound and important change. One of the most prominent features of this change is the rapid development of telecom service provide industry, which is composited by service providers (SP), content providers (CP) and application providers (AP). At the same time, however, there are some problems have been associating with the development of telecom service provide industry all the time, and become much more serious. Among them, the vertical relationship of upper and lower stream between telecom operators and telecom service providers is the most typical one. Some researches and empirical evidences show that the vertical relationship between telecom operators and telecom service providers is complex but essential, and it has great influences on the development both telecom operation industry and telecom service provide industry, even as well as telecommunication industry.However, based on the review and in-depth analysis of previous studies in both vertical relationship theory and telecommunication industry, this paper found there are still some deficiencies and fields which can be improved in the vertical relationship between telecom operators and telecom services providers. The deficiencies are: previous studies tend to discuss vertical relationship in established structure, lack of the explore of formation mechanism; previous researches usually studied telecom operators or telecom service providers separately, lack of the discuss of connections and relationship between them; the studies which reflect the specific forms of vertical control between telecom operators and telecom service providers is limited.In order to limit those deficiencies, this study designed three researches that aim at reflecting and investigating the vertical relationship between telecom operators and telecom service providers. These researches based on the vertical relationship theory that belongs to theory of the industrial chain, and combined with the specific features of telecommunication industry in analysis. This study makes innovations and breakthroughs in the following directions:First, analyzes vertical relationship between telecom operators and telecom services providers from theoretical view, explores the internal reason and mechanism in formation of this relationship, verified by empirical data. Second, provides a theoretical positive control model which reflecting the control of telecom operators to telecom service providers. This model includes vertical relationship influencing factors, such as telecom operation industry control force, telecom service provide industry control force, telecommunication development force, and verified by empirical data in the final. Third, combined with the features of telecommunication industry, this study defines the typical forms of vertical control between telecom operators and telecom service providers, explores the influences of vertical control to prifits of upper and lower stream industries by constructing economic model.The conclusions of this study are:(1) The vertical relationship of upper and lower stream between telecom operators and telecom service providers is the positive control of telecom operators to telecom service providers. The reason for this formation is the differences of telecom operation markets and telecom service provide markets in structure and control force. Compared to the Monopolistic Competition structure of telecom service provide market, the Oligopoly structure of telecom operation market gives the telecom operators much more force and confidence in control and action. The investigations from view of economic theory, the vertical control index, the specific forms of vertical control, as well as the differences of efficiency between telecom operators and telecom service providers, all proved the conclusion above.(2) Constructed "Positive control model of telecom industry chain", and finished verification by empirical data. The results show that the positive control that telecom operators to telecom service providers is influences by upper telecom operation market control force and lower telecom service provide market control force. The positive control would improve the development of telecom operation industry, and have negative effects to the development of telecom service provide industry and telecommunication industry.(3) There are four specific forms of vertical control between telecom operators and telecom service providers, and they are:Vertical Integration, Resale Price Maintenance, Exclusive Dealing, Class Discrimination. Among them, Resale Price Maintenance, which is reflected by controlling of telecom operators in the charging rights of the final product, and Class Discrimination, which is reflected by managing of telecom operators in different scale telecom service providers, are the typical and specific ones. The results of economic model show the positive control of telecom operators to telecom service providers would improve the profit of telecom operation industry, make loss of telecom service provide industry commonly. Besides, the structure of upper and lower markets influences the positive control, with the increase in the number of telecom service providers, telecom operators have more power in implementation of the positive control, and thus obtain much more profits.