Micth white is the founder and CEO of white Telecom, a publicly traded cell phone service provider that is about to start offering service in remote areas across Canada (see grey area in figure 1) following the approval of their application to the Canadian Radio-television and Telecommunications Commission (CRTC). The CRTC was willing to fast-track the approval for white Telecom to enter these markets as there is often only one provider of wireless mobile in these areas and rural Candians have been complaining about high prices and poor customer service. The CRTC has not yet granted them access to any of the densely populated urban areas of Canada (see yellow area figure 1). Canada's current mobile wireless industry can best be described as an oligopoly where Rogers, Telus, and Bell have over a 90% market share. This means that the market can be potentially very lucrative if white Telecom can strategically secure a foothold in the rural market and create a strong business case to present to the CRTC so that they gain access to the urban market. Figure 1: Canada Cell Phone Coverage Map The shareholders and the board of directors for white Telecom are getting very impatient with the current share price of the company and the large capital investments that have been made to enter the Canadian wireless mobile market. The pressure is on Mr. white to present a strategic plan that will impress the board and show the company's long-term profit outlook justifies the recent investments. Mr. white friend, William Veldt, has recommended you based on your outstanding work helping Outdoor Living. Therefore, white Telecom has made you a lucrative offer to consult them during this important time.

Task: white Telecom would like you to present brief written report which needs to include the following deliverables: 1. Pricing estimate and annual profit estimate 2. Strategic advertising plan 3. Analysis to support urban expansion application to the CRTC Calculations, analysis, charts, or graphs are encouraged and should be included as appendices after the written report to support your recommendations. Pricing Strategy and Profit Prediction: white telecom will only be offering a single monthly plan (unlimited talk, text, and data) and is still unsure of what price they will end up offering for this wireless mobile service. Since white will be competing with one other existing company in most rural markets there will be an expected transition from the existing the current monopolies to Cournot duopolies since: 1) There are usually only two firms in the rural markets serving millions of potential customers 2) The firms produce essentially homogeneous products 3) Each firm has near identical cost structures 4) Barriers to entry for other firms are very high Mr. white anticipates that once they enter the market prices will drop due to the increased competition but he needs your help estimating what the equilibrium price will be and what the expected profits (not including fixed costs) might be for the company. white Telecom analysts have estimated the market elasticity for rural wireless mobile service in Canada is -1.1 and their estimates for marginal cost per customer will be approximately $25 per month. white Telecom estimates that the total size for the rural wireless mobile market to be 4,000,000 customers. Mr. white would love to be able to present to the board of directors the expected equilibrium price and expected yearly profits (before any strategic advertising) at the next board meeting coming up next week. Advertising Strategy: In order to increase market share in Canadian markets white Telecom is considering launching one of three different advertising campaigns. Analysts have studied the past behaviour of Bell, Telus, and Rogers and how they have reacted to advertising campaigns by their competitors and what the effect has been on industry profits. Research has shown that all 3 major cell phone service providers have behaved very similarly in the past with similar effects on profit levels. white is considering the following 3 advertising campaign options: 1) 'Extensive' Advertising Campaign 2) 'Targeted' Advertising Campaign 3) 'Minimal' Advertising Campaign white Telecom will essentially only be competing with one existing company in rural markets who have the exact same options available to them. A summary of the options and the expected adjustment in yearly profits is shown in figure 2. Figure 2: Rural Advertising Strategy Outcome Summary Mr. white wants you to use your knowledge of game theory to give an in-depth analysis of what white Telecom should do, what they can expect their competitors will do, and any risks they should consider. Expansion Pitch to the CTRC: white Telecom needs to make a quick pitch at an upcoming meeting with the CRTC to help support their recent application to expand into the urban areas of the Canadian wireless mobile market. Using only the data provided and your knowledge of industry concentration measurements, the Lerner index and mark-up factors, the Rothschild Index, and the Dansby-Willig Index, Mr. white would like you to make a brief and effective argument for why they should be given access to the rest of the Canadian cell phone market including the densely populated urban areas and how this will benefit Canadian consumers. - white Telecom estimates that the average monthly cell phone bill in Canada is $75 and the marginal cost of providing service to a customer is $25. - The elasticity of demand for the total Canadian cell phone market is estimated to be -1.2. The elasticity of demand for Bell, Rogers, and Telus is estimated to be -1.4. - The Dansby-Willig Index is estimated to be 0.85 for the Canadian wireless mobile industry *Optional: You may wish to use your knowledge of Oligopolies to make a case that Bell, Rogers, and Telus might be colluding in the Canadian mobile wireless market. If you can prove this mathematically you will receive bonus marks.