Access to and penetration of ICT in rural Thailand

This paper presents an econometric study of information and communication technology (ICT) in all 70,000 rural villages in Thailand, where the ICT considered consists of fixed-line telephone service, mobile telephone service, public telephones, computers, and Internet service. The results may provide information that helps policymakers decide where to put limited resources to promote ICT, and helps profit-seeking ICT companies target regions that maximize revenues. The study found that education is far more important than income in predicting the percentage of households who adopt ICT services, and that some unexpected variables such as the penetration of pickup trucks are useful predictors as well. Even in areas where fixed-line phone service is available, 70% of households with computers choose not to become Internet subscribers, although many presumably have enough money and technical knowledge. By separating availability from penetration of ICT, the study found that they can have different predictors, which means that researchers who do not separate them may get misleading results. There is no evidence showing mobile telephone service as a substitute for fixed-line telephone service. Also, public telephone service had little or no impact as a substitute for fixed-line or mobile telephone service, so phone companies need not fear that deployment of more public telephones will decrease their subscribership. Finally, there appears to be significant unmet demand for telephone service in rural Thailand where the infrastructure does not yet exist.     

Hedonic prices in the German market for mobile phones

This paper provides a hedonic price analysis of mobile telephones for the German market, based on data of 302 different handsets from 25 manufacturers over the period from May 1998 to November 2003. By measuring shadow prices for different product characteristics, the authors find that volume, for example, has a negative effect on the price of a mobile handset, while the number of ringtones and the talk time battery life relative to the handset's weight positively affect mobile phone prices. Perhaps somewhat surprisingly, radiation is statistically insignificant. Also handsets have become cheaper over time, and handsets with additional features, such as MMS, MP3 or Bluetooth, command a higher price. In addition, there are positive brand name effects for some brands. According to the estimations presented in this paper the brand name premiums may range from 57 to 172 euro.     

Income distribution and the diffusion of networks: An empirical study of Brazilian telecommunications

Telecommunications is often considered to be an important contributor to economic growth, and most countries have therefore adopted several initiatives to improve coverage of fixed as well as mobile telephones. This paper focuses on the role of income distribution on the diffusion of fixed telecommunications in Brazil. The focus is on how the distribution of income may affect affordability and thereby the market size. The result is that an uneven income distribution may result in higher coverage for the poorest municipalities in the study since the uneven distribution allows for at least some consumers to reach the critical level of income. For municipalities above a certain average income level, the effect is reversed and coverage will be adversely affected by high inequality. The findings are robust to different measures of inequality.     

Uncertainty of public pay phone in Thailand: Implications for the universal service obligation

Public pay telephones are fast becoming technological dinosaurs headed quickly toward extinction. In Thailand, however, the National Broadcasting and Telecommunications Commission (NBTC) has included the public pay phone as part of the Universal Service Obligation (USO) to ensure that all people in the country have reasonable access to a standard telephone service on request, and that payphones are accessible to all people on an equitable basis, wherever they live or carry on business. In spite of this, however, public pay phones and their revenue are also sharply declining due to the ever increasing encroachment of mobile phone technology. The researcher therefore undertook a study to empirically examine the key determinant factors for individual consumers using public payphones. A discrete choice model is employed together with the analysis of data from a 2011 national survey commissioned by the NBTC. Payphone usage is determined by the ownership of fixed phones, mobile phones and income which all play an important role with payphone being a necessary service for low-income people. Hence, NBTC should continue support through the USO fund and reassess the areas and groups of people who need this service in order to ensure that the USO policy is effectively and beneficially implemented.     

Welfare effects of the Telecommunication Reform in Mexico

The telecommunication sector in Mexico was highly concentrated until 2013. The sector was mostly composed by a dominant player, a rationed market (low density of services), a poor institutional design, high tariffs, and weak regulation agents. The Herfindahl-Hirschman (HHI) index was 5333 for mobile telephone and 7,029 for fixed telephone services—among the highest scores in the world. In order to promote competition in the sector, Congress approved a reform in 2013 to establish a new regulator empowered to impose asymmetrical rules in the case of the predominance of a single firm. A declaration of preponderance of the dominant player was issued, promoting free interconnection rates and the mandatory sharing of its passive and active infrastructure with the rest of the firms in the industry. The new institutional design led to increased competition in the sector, decreasing the mobile and fixed telephone prices while increasing the coverage and penetration of these services. In this article, an applied general equilibrium model for the Mexican economy is employed to assess the impact of the Telecommunication Reform in Mexico in the telephone sector, consumer welfare, and income distribution. The model is static, encompassing 10 types of consumers (rural and urban and the five income quintiles) and 40 sectors (of which four are disaggregate telecommunications industries). It assumes fixed wages and capital rental prices as well as idle resources. The main results indicate that the effects of the reform are not minor; the drop in telephone prices would reduce the general consumer price index by almost 2%, and the value added would increase by more than 3%, benefiting mainly households in the highest income quantiles.     

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.     

Risk Sharing Mechanism in Japan's Auto Industry: The keiretsu Versus Independent Parts Suppliers

This study investigates (1) whether risk sharing behavior of subcontractors has changed over the two decades (1973–94); (2) whether there are any differences between keiretsu firms and independent firms in sharing risk; (3) how ownership of its parts-suppliers through minority shareholdings by automakers or sending directors to parts-suppliers affects the suppliers' risk sharing behavior. Empirical results support the risk-sharing hypothesis in general. The keiretsu firms are more risk averse than independent firms in the first period (1973–85). In the second period (1985–94) independent firms become more risk averse than keiretsu firms. This may suggest that the keiretsu system would work as a shock absorber in an unfavorable business environment.     

Disconnecting: Understanding decline in universal service

At a time when choices for voice service and funding for universal service were growing, the United States experienced an unprecedented drop in household telephone penetration. Universal service in voice telephony is generally taken for granted in the United States. However, recent data from the FCC shows a significant decline in the number of U.S. households that have a telephone of any kind (including mobile), from a peak in telephone penetration of 95.5% in March 2003 down to 92.9% in November 2005. This decline is both statistically significant and meaningful, as approximately 2.6% of U.S. households could not easily reach 911 for emergencies. This study uses regression analysis of state-level data to determine what drove this decline in universal service. The results demonstrate that the recent decline in universal service in the U.S. is driven by an increase in black population, inadequate consumer protection laws, and increases in wireless telephones per capita. Lifeline effectiveness does not appear to mitigate the decline in penetration, while Link-Up effectiveness may have a limited effect.     

Estimating consumer surplus in the mobile telecommunications market: The case of Korea

This paper estimates consumer surplus in the Korean mobile telephone services (MTS) market. The Korean mobile telecommunications market has grown rapidly since 1997 when competition was introduced and Code Division Multiple Access (CDMA) technology was commercialized. Because consumer surplus is relevant to the controversy over establishing an appropriate price level between consumers and service providers, the need for a robust measurement of benefit from MTS is increasing. The measured net consumer surplus estimated by means of elasticities of demand reached about US$48.8 billion in the period 1996–2004 and the changes amounted to about US$8.8 billion during the same period. In particular, after competition was introduced into the market with an accompanying price decrease and increase in the number of subscribers, consumers have benefited greatly. Therefore, it can be inferred that a facility-based competition policy and the reduction in price of access such as handset subsidies all played a positive role in the early diffusion of MTS in Korea. The estimated consumer surplus in this paper does not include network externality (option externality); if this were considered, the total social welfare of the consumer would be larger.     

Fixed-to-mobile substitution in the European Union

This paper analyzes substitution between access to fixed-line and mobile telephony in the European Union using cross-section panel data on households’ choices of telecommunications technologies in years 2005–2010. We estimate a structural model of household?s demand for access to: (i) fixed-line only; (ii) mobile only; and (iii) both fixed-line and mobile. We find that growing Internet usage increases the share of ‘fixed + mobile’ households, which suggests that households keep their fixed-line connection to access Internet. However, the spread of 3G and cable broadband access decreases the share of ‘fixed + mobile’ households and increases the share of ‘mobile only’ households. Hence, fixed-to-mobile substitution was slowed down by the spread of Internet but it may continue with the spread of mobile broadband. Furthermore, bundling of telecommunications services increases the share of ‘fixed + mobile’ households and decreases the shares of ‘mobile only’ and ‘fixed only’ households. Therefore, operators which can bundle fixed-line connection with Internet or mobile services may slow down fixed-to-mobile substitution.     

Quality-adjusted international price comparisons of mobile telecommunications services

Many countries' policymakers have conducted international price comparisons of mobile telecommunications services to prevent service operators from overcharging subscribers. However, those comparisons have become more complicated because of the escalation in service usage and telecommunications expenditures spurred by the proliferation of smartphones and broadband LTE wireless internet service networks. The basket-based methodologies that have been widely used for international price comparisons are also limited—first, because the baskets for comparison may not be representative of actual service usage patterns in some countries; second, because they are difficult to apply to highly differentiated service plans due to the significant increase in wireless internet service usage and widely used plans with unlimited voice call service and SMS/MMS; and third, because they cannot consider the quality of service, such as upload and download speed in various service environments, at all. As an alternative, this paper proposes a hedonic pricing model that accounts for service quality and its variation in potentially disruptive environments, as well as fixed charge for a mobile phone additional to the price of service plans. The model was used to derive quality-adjusted price indices of mobile telecommunications services for twelve cities in ten countries with broadband LTE wireless internet service. The empirical results confirmed that the price index of each city varied significantly across the specifications,—both within the United States and internationally—depending on whether the model was constructed to reflect service quality and its variation on roads, in buildings, and in subways. The price index of each city also varied depending on whether the subsidized price of a mobile phone was considered part of the monthly price of a service plan. These results have important implications for policymakers seeking to understand the ultimate level of mobile telecommunication service prices for their country in a global context.     

Mobile-only consumers arise from heterogeneous valuation of fixed services

Mobile-only users are usually perceived as a consequence of fixed-mobile substitution. This study uses a unique dataset based on a survey in France, combined with interviewee's telecommunications billing data, to reveal heterogeneous consumer preferences for fixed services. With the same mixed logit model we estimate the willingness to pay (WTP) for fixed communications services and fixed-mobile relationship. Results show a very large heterogeneity of WTP for fixed services among consumers. In addition, we show that fixed and mobile data are complement for all consumers. Mobile-only consumers have a much lower but non-zero WTP, and higher price sensitivity compared to fixed-mobile consumers. Consequently, an increase in the fixed offer price would reduce the demand for fixed service. Heterogeneous preferences for fixed services constitute an alternative explanation for the existence of mobile-only users, despite the complementary nature of fixed and mobile broadband. Counter-factual simulations show that the share of mobile-only could also be driven by the way to subsidize mobile handset. For instance, making the handset subsidy only available to fixed-mobile quadruple play subscribers could reduce the share of mobile-only by half.     

Dream or reality: providing universal access to basic telecommunications in Nigeria?

Nigeria has publicly announced its intentions to make basic telecommunications, specifically telephones, affordable and universally available to its people. However, several issues make this proposition especially difficult for countries such as Nigeria. For instance, Nigeria's population is large at 110 million with less than 1% presently able to access telephones. Furthermore, over 70% of Nigerians, the majority of them poor, live in rural areas where telephone lines do not presently exist. This paper studies the universal service proposition viz a viz these conditions by analyzing Nigeria's attempts to provide telephone service since the country's independence in 1960. The paper notes impending problems with Nigeria's attempts to achieve critical mass, which is essential for universal access. Ultimately, it suggests various strategies that the country should use to stimulate critical mass and achieve universal access.     

The non-linear relationship between ICT diffusion and financial development

This research investigates the linear and non-linear effects of information and communication technology (ICT) diffusion on financial development for 81 countries over the period 1990–2015 by employing the generalized-momentum method (GMM) and panel smooth transition regression (PSTR). Some main conclusions are presented as follows. First, comparing the different effects of ICT on financial development between the high-income group and the middle- & low-income group, telephone and Internet positively influences both groups’ financial development, whereas mobile cellular causes a negative effect in high-income countries, but a positive effect in middle- & low-income countries. Second, the growth of the Internet and telephones raises the financial development in all regions, while mobile cellular growth positively affects financial development only in Africa. Finally, strong evidence appears that the PSTR models capture the smooth non-linear effects of ICT diffusion on financial development, in which the effect of ICT diffusion on financial development is positive in the lower level of ICT diffusion, but turns negative in the higher level of ICT diffusion.     

Internal cartel stability with time-dependent detection probabilities

To account for the illegal nature of price-fixing agreements, per-period detection probabilities that can vary over time are introduced in a dynamic oligopoly. The resulting ICCs for internal cartel stability indicate that for discount factors up to 10% per-period detection probabilities of 5% are needed to reduce the number of cartel members by 50%. For the special case of stationary supergames with constant per-period detection probabilities p elegant rules emerge: internal cartel stability requires the discount factor to increase with 100 × p / (1 − p) percent while a fixed fine of 100 × (1 − p) / p percent of incremental cartel profits is required for making the ICC always binding.     

TP case study: fixed–mobile interconnection in India

The Telecommunications Regulatory Authority of India (TRAI) attempted, in late 1999, to introduce the calling party pays (CPP) regime for mobile cellular services, with a corresponding revenue-sharing arrangement between fixed and mobile operators. According to the revenue-sharing proposal, mobile operators in India were to be compensated for carrying traffic to and from the fixed networks. Under their original license conditions, fixed operators (usually one of the two state-owned incumbents) were not paying mobile operators for terminating calls on their networks. However, mobile operators had to compensate the state-owned incumbent for terminating traffic. This unfavourable environment for mobile operators has meant that mobile services have not been able to reach their full potential in India. There was great disappointment within the mobile industry when the TRAI's CPP order was overturned by the Supreme Court of India in early 2000, due to lack of jurisdiction. Since then, the enabling legislation has been amended. It is hoped that the new provisions of the TRAI Act will empower the regulator to establish a level playing field for mobile network operators. It is only through the creation of a suitable framework for interconnection that the TRAI will be able to ensure the success of telecommunications reform in India.     

Tariff structures and access substitution of mobile cellular for fixed line in South Africa

The phenomenal growth of mobile cellular relative to fixed line phone ownership in Africa has been attributed to a wide range of factors, including institutional factors (such as competition and private foreign ownership), ease of access (low waiting times and no credit history for prepaid access) and of course the mobility. What has not received any attention is how the tariff structures in mobile have influenced consumer preferences. This paper examines how the difference in tariff structures between fixed line and mobile have accounted for the relative popularity of cellular in South Africa. It finds that the balance between fixed monthly and usage fees makes mobile both affordable and cheaper than fixed line for the bottom 50–60% of households that spend relatively little on communication. This is reflected in household behaviour where lower-income households treat cellular as a substitute for fixed line (owning only one or the other), while higher-income households treat the two as complements (owning both).     

Impact of telecommuting on mass transit congestion: the Tokyo case

Telecommuting, a dispersed style of commuting enabled by developments in info-communication technology, is becoming increasingly popular among Japanese white-collar employees. According to our estimates, 9–14 million employees will telecommute by 2010, which will result in a 6.9–10.9% reduction in congestion in Tokyo, Japan. Associated cost savings are equivalent to 7.9–26.4% of annual spending on public transportation. Due to the considerable size of these positive external effects, some degree of policy support will be necessary to achieve a socially optimal level of penetration by telecommuting.     

Opportunism and menus of two-part tariffs

We show that a menu of two-part tariffs can solve the opportunism problem identified by McAfee and Schwartz (1994) [McAfee, R.P., Schwartz, M., 1994. Opportunism in multilateral vertical contracting: nondiscrimination, exclusivity, and uniformity. American Economic Review, 84 210–230] in vertical games with sequential contracting, provided the sunk costs incurred by the first firm to invest are not too large. If the seller were to engage in opportunism with a second firm in an attempt to shift rents from the first firm, the first firm could mitigate the dissipation of its rents by choosing from its menu of contract options the tariff with the higher marginal price and lower fixed fee. The prospect of the first firm's choosing the ‘wrong’ two-part tariff in the event of opportunism is, in some environments, sufficient to make opportunism unprofitable for the seller.     

Increasingly Marginal Utilities: Diversification and Free Cash Flow in Newly Privatized UK Utilities

This article was the experience of the newly privatized UK utilities as a unique natural experiment to explore aspects of the life cycle/free cash-flow hypothesis of Dennis Mueller and Michael Jensen. It demonstrates that in their immediate post-privatization, regulated environment the UK utilities experienced severe attenuation of all the principal forms of corporate governance, while remaining substantial cash generators but with limited scope for core business growth. It shows that the firms responded with a rapid – and apparently unsuccessful – expansion of non-core activities. The article then uses a two-way random effects panel design and finds substantial and robust support for the maintained hypothesis that (lagged) cash-flow drove diversification. The results also generate clear implications for privatization policy. In particular, they suggest that the incentive benefits anticipated from substituting private for government ownership may become distorted if the managements of newly privatized enterprises are sheltered from the regular disciplines of corporate governance.