Restructuring the US telecommunications industry: Impact on innovation

Plans for restructuring the US telecommunications corporation, AT & T have been discussed recently. The fear has been expressed that such restructuring would be harmful to innovation and technical progress in the industry, and hence ultimately harmful to the USA. This article addresses that question in the context of proposed legislative changes to the 1934 Communications Act. Existing economic evidence suggests that these fears are unfounded. Arguments relating to firm size (the ‘Schumpeterian hypothesis’), concentrated industry structure, and regulation suggest that the proposed changes would increase rather than decrease innovative activity.     

The US telecommunications industry in transition: Bypass,regulation and the public interest

Since the AT&T divestiture, the Federal Communications Commission has been attempting to introduce competition into the telecommunications industry in the USA. This article discusses the problems of the transition period, particularly the contradictions between the policy of widespread availability of affordable basic telephone service, and the short-run burdens on most subscribers as competition erodes the toll-to-local subsidy. The authors discuss welfare economics in the telecommunications industry, and propose an interim and self-terminating plan for gradual deregulation. The proposal includes an empirical test of economic or uneconomic local exchange bypass, and a social compensation option which meets the requirements of Pareto superiority.     

Switching costs in the US seed industry: Technology adoption and welfare impacts

We evaluate the role of brand and technology switching costs in the US soybean seed industry using a unique dataset of actual seed purchases by about 28,000 farmers from 1996 to 2016. Using a random coefficients logit model of demand, we estimate brand and technology switching costs, characterize the distributions of buyers’ willingness to pay for seed brands and the glyphosate tolerance (GT) trait, and assess the implications of brand and technology switching costs for farmers’ welfare, technology adoption, firm profits, and firm market shares. We find that farmers are willing to pay large premiums for brand labels, and even larger premiums for the GT trait, although there is considerable heterogeneity in these values. Switching costs play an important role in the soybean seed industry. Eliminating these costs would significantly increase buyers’ welfare, reduce seed prices and firm profits, decrease adoption of the GT trait, and impact industry consolidation by expanding smaller firms’ market shares.     

Regulation and innovation in the telecommunications industry

This paper aims to introduce issues that relate regulation and innovation in the telecommunications industry. We try to address the following question: which types of regulatory schemes are likely to promote innovation in a fast-growing telecommunications industry? Section 2 analyses ex ante control by sector-specific regulation and ex post control by competition policies. Section 3 deals with the importance of compatibility hence regulation of standards in the telecommunications industry. Section 4 discusses the major issues pertaining to the relation between innovation and pricing on the one hand, and innovation and unbundling on the other.     

Network effects and the adoption of new technology: evidence from the U.S. telecommunications industry

This paper examines variations in the adoption of new technology by firms operating in a network-based industry: telecommunications. These variations are explained as a function of three network effects: the first is the conversion effect, driven by operations-related increasing returns to scale; the second is the consumption effect, driven by demand-side increasing returns to scale; the third is an imitative effect. We expect the conversion effect to be felt more strongly during earlier phases of a technology's evolution, while a strong consumption effect is felt throughout. The imitative effect is also expected to be felt throughout. These hypotheses are examined with respect to electronic switching adoption in the local operating sector of the U.S. telecommunications industry. An analysis of the variations in adoption levels of the 40 largest firms over a period lasting from 1973 to 1987 supports our expectations, except for the imitative effect. © 1998 John Wiley & Sons, Ltd.     

Recent developments in US wireline telecommunications

This article presents a selective survey of several recent developments in the US market for wireline telecommunications services spanning the 2003–2005 period. Specifically, the article discusses the recent decline in overall telephone penetration rates, the substitution between wireline and wireless telephony, intermodal competition issues raised in the context of the FCCs review of the Cingular/AT&T Wireless merger, and the potentially anticompetitive effects of incumbent local exchange carrier tying of voice and DSL service. The article identifies several areas for future research motivated by each one of these developments.     

Competition and performance in the UK telecommunications industry

Judging by historical and crossnational experience, privatization of British Telecom promises to increase the rate of expansion of telecommunications usage, but also to redistribute services and charges. Public dissatisfaction with these reallocations could recreate the political discord that stunted the early growth of the British telecommunications manufacturing sector, unless the new technology and regulatory institutions substantially alter the economic environment. More intense competition. rather than prospective changes of network ownership, seem to have improved the seem to have improved the manufacturing industry's performance in recent years.     

Employment dynamics in the Italian telecommunications industry

Important quantitative and qualitative changes are affecting employment in the telecommunications manufacturing and services industry worldwide, namely the selective downsizing of employment stocks, the reshaping of job contents and employment composition, and the adoption of innovative labour practices. By resorting to micro-data from the archives of the Italian Institute for Social Security, the paper outlines employment dynamics in the Italian telecommunications industry between 1986 and 1995. Most notable changes detected for public telecommunications operators include the acceleration of inter-companies labour flows and the development of an external labour market for higher skilled employees. However, personnel policies to protect the holders of less tradable skills still exist.     

Trade patterns,industry structure and industrial policy in telecommunications

This article examines three major changes which have been occuring in the telecommunications market: liberalization, leading to increased competition in services and equipment, the internationalization of the equipment market, and a rapidly changing industrial structure. The interrelationship among the three trends is analyzed, and the authors hypothesize that it is the technological determinants which are driving the changing structure of the industry and its trade patterns and regulatory environment. The instruments of industrial policy are discussed, with examples from several countries. The European Community's policy in telecommunications is explained in some detail.     

Privatization and production efficiency in Taiwan's telecommunications industry

Many managers, economists, and policy-makers have long believed that the production of a private enterprise is more efficient than that of a public one. This paper investigated whether it was good policy to privatize Taiwan's telecommunications industry by comparing the changes in efficiency in Chunghwa Telecom Company (CHT Co.) before and after privatization. The data envelopment analysis (DEA) model was used to evaluate their operational performance both pre- and post-privatization. The technical efficiency (CRS) computed with the CCR model assuming constant returns to scale, the technical efficiency (VRS), and the scale efficiency (VRS) were obtained with the BCC model assuming variable returns to scale, using the time-series data from CHT. The findings of this study show that the production efficiencies of CHT, both pre- and post-privatization are inefficient since all of the technical efficiencies are smaller than one.     

Access regulation and infrastructure investment in the mobile telecommunications industry

While mobile virtual network operators (MVNOs) increase competition in the mobile telecommunications industry, granting market access to MVNOs may have unwanted consequences. In particular, infrastructure investment by incumbent mobile network operators (MNOs) may be smaller. This paper examines the effects of MVNO entry and access regulation on the investment behavior of MNOs. It uses firm-level data for 58 MNOs in 21 OECD countries during 2000–2008. The results suggest that mandated provision of access is related to lower investment intensity of MNOs, while voluntary access provision has no effect. Although reduced investment incentives do not necessarily correspond to under-investment, this underscores the need for those countries where MVNOs are provided access to address the issue of investment incentives.     

The Canada-US Free Trade Agreement and the telecommunications industry

The Canada-US Free Trade Agreement, which came into effect on 1 January 1989, could well prove to be a breakthrough in the liberalization of trade between the two countries. This paper highlights the provisions of the FTA that indirectly or directly affect the telecommunications industry, assesses their possible impact and evaluates their probable importance to different participants in the industry. The authors make many predictions as to the effects of this agreement in terms of both telecommunications equipment and services and foresee greater competition and larger markets.     

Determinants of customer loyalty in the wireless telecommunications industry

This paper reports the results of research investigating the determinants of the propensity to switch wireless service providers. A model generated from the data rather than from a priori theory is presented, and it is found to uphold the strong relationship between customer satisfaction and customer loyalty exhibited in prior studies. In sharp contrast to the prevailing industry practice of ‘locking in’ customers by means of restrictive contracts, this research suggests that wireless service providers are better off improving customer satisfaction in order to minimize customer defection. This would imply shifting scarce resources to customer retention through improved service, saving costs of expensive customer acquisition campaigns. The paper also proposes two methodological innovations. First, the research employs the ‘Tetrad methodology’ as an exploratory technique prior to building a Structural Equation Model (SEM) making it possible to identify drivers of loyalty—direct or indirect—when it might not be known a priori what these drivers might be. Secondly, the paper proposes an approach to estimating moderator effects on the relationship between satisfaction and customer loyalty.     

Core business regulation and dual diversification patterns in the telecommunications industry

A firm is confronted with the separate decisions of product and international diversification. It is suggested that these postures are linked to external contingencies in firms who face core business regulation. A technique is developed to explain dual diversification patterns using evidence obtained from the new industry comprised of the Regional Bell Operating Companies (RBOCs).     

Market Power in US Broadband Services

The US residential broadband market is commonly characterized as a duopoly consisting of telephone carriers (digital subscriber lines) and cable TV operators (cable modems). The implication is drawn that market power obtains; this, in turn, drives recommendations for new competition policy remedies. Yet, market power cannot be directly deduced from market shares or price-cost margins. We develop an economic analysis that examines both static and dynamic factors in considering market power, finding that fixed broadband providers do not appear to generate supra-competitive returns. Public policies to regulate broadband providers should be informed by these marketplace conditions.     

Convergence and diversification in cable industry: An empirical analysis of the deployment pattern of cable telephony in US local telecommunications markets

The primary purpose of this study is to examine the deployment pattern of cable telephony in the US local telecommunications market. A model is established stressing that the size of local markets and the specific cost advantages of local cable systems are associated with the deployment of cable telephony by cable operators.     

Profitability, productivity and price recovery patterns in the U.S. telecommunications industry

We undertake a study where we examine changes in the profitability, productivity and price recovery of firms in the U.S. telecommunications industry over a sixteen-year period. We assess the performance of thirty-three major companies in the local-exchange sector over six time periods 1975, 1978, 1981, 1984, 1987 and 1990, using a performance analysis model which disaggregates the profitability measure into two components: productivity and price recovery. We demonstrate the computation of performance using this technique. Our study indicates that the opening up of markets has had a significant impact on different dimensions of performance in the telecommunications industry, also validating a number of theoretical assumptions about the impact that industry changes are expected to have on firms.     

Third generation new entrants in the European mobile telecommunications industry

This paper focuses on new entrants within the European mobile telecommunications industry. More particularly, the paper identifies those new entrants that emerged from the third-generation (3G) licensing process across Europe before examining how they have fared. Four operators seeking to become new entrants across a range of countries are identified, although only one of them—Hutchison Whampoa trading as ‘3’—is considered to be fully active as a 3G new entrant. It is argued that the success of Hutchison Whampoa to date has been patchy, and that a supportive parent company has significantly contributed to its ability to remain active.     

On the design of performance measurement plans in the telecommunications industry

This paper analyzes the design of performance measurement and remedy plans that have been implemented in the telecommunications industry to ensure competitive local exchange carriers are afforded a meaningful opportunity to compete in the provision of local exchange services. It demonstrates that the plans can impose penalties on incumbent local exchange carriers even when the incumbents provide the same or higher level of wholesale service quality to their competitors than they provide to themselves. Simulations are employed to illustrate the magnitude of these penalties.     

How value and trust influence loyalty in wireless telecommunications industry

Despite making significant investments in enhancing the customer service experience, long-term customer loyalty remains an elusive dream for many service providers. Particularly in the telecommunications industry, switching providers even from within continuous contract relationships is easy and companies struggle to retain their customers. Trust and value are considered cornerstones of long-term relationships, so it is perhaps surprising that previous research on how relationship age and usage level actually affect value, trust and loyalty is inconclusive. The current research is set in the telecommunications services field and draws on a large-scale survey undertaken in Finland. The findings support the contention that perceived value relates positively to loyalty, and that trust mediates that relationship. Surprisingly, in the telecommunications industry, increasing relationship age and usage level strengthen neither value and loyalty nor the links between trust and loyalty. The results may be explained by the unique characteristics of the highly competitive mobile telecommunications sector, and confirm the view that loyalty does not pay without strategies that value long-term customers and thereby build trust with new customers.