Analysis on Vertical Integration of Telecom Operators

In resent years, there have been significant changes in China’s telecom VAS industrial chain. The telecom operators have been taking steps to develop their own VASs and bypass the independent VAS providers. This article analyzed the reasons and motivation of telecom operators’ vertical expansion from the perspectives of neoclassical economics, new institutional economics and enterprise competence theory. And this article also tried to build a game model to analyze the influence of operators’ vertical expansion on industrial chain and social welfare. Based on the above studies, this article arrived at a conclusion that the regulator should correctly guide the telecom operators’ vertical expansion, because this strategy of telecom operators is economical and efficient for the industry, and will bring considerable benefits to the industrial chain and social welfare in China.