What It Was Like,What Happened,and What It's Like Now: Developments in Telecommunications Over Recent Decades

A survey of telecommunications over past decades. Overall prices of services have declined less rapidly since deregulation, with local rates rising, long-distance rates falling. Productivity increased strongly during period of Bell System regulated monopoly. Service quality of traditional telephone services has fallen, but many new services have been added. Innovations in customer premise equipment since deregulation far exceed those in prior years. Many major network innovations occurred during years of Bell System monopoly and network innovations have continued since. Actions by the Federal Communications Commission actions anteceded government antitrust case and are responsible for most of the changes since 1978. Most of the beneficial changes have little, if anything, to do with antitrust case and divestiture.     

The Simple Welfare Economics of Network Externalities and the Uneasy Case for Subscribership Subsidies

The goal of universal service has dominated the telecommunications policy landscape for at least the past half century. This policy objective has been promoted with cross subsidies from long-distance telecommunications services to subscribers to local telecommunications service. The economic rationale for these cross subsidies is network externalities. In this paper, we show that: (1) the presence of network externalities, even if substantial in overall magnitude, does not generally justify a subscribership subsidy, even a well-designed one; and (2) the empirical realities of telecommunications markets make it unlikely that subscribership subsidies of any kind will increase social welfare.     

Policy issues in the development of telecommunications

The paper examines the specific features of the telecommunications system which determine its character, and the regulatory issues which arise out of a situation of potential conflict between the telecommunications network operators (PITs) and the providers and consumers of value added services transacted on the network. It looks at the policy options available to reconcile such conflicts, and at how EC policies are shaping the future of the European telecommunications ststem. It concludes that current development in telematics are aimed mainly at business users, and that safeguards for the private custormer will be necessary in order to ensure the provision of a socially equitable service.     

Policy issues in the development of telecommunications

The paper examines the specific features of the telecommunications system which determine its character, and the regulatory issues which arise out of a situation of potential conflict between the telecommunications network operators (PITs) and the providers and consumers of value added services transacted on the network. It looks at the policy options available to reconcile such conflicts, and at how EC policies are shaping the future of the European telecommunications ststem. It concludes that current development in telematics are aimed mainly at business users, and that safeguards for the private custormer will be necessary in order to ensure the provision of a socially equitable service.     

Information technology and the spatial dynamics of capital

This paper considers the spatial attributes of computer network technology and their implications for modelling the regional dynamics of the information economy. Attention focuses initially on the assumptions made about the locational and usage characteristics of capital in some traditional regional economic models, and then it is shown that the new information technology, as a form of ‘information capital’, requires closer scrutiny of these approaches. We emphasize the ‘communicability’ of this type of capital, specifically the capital services embodied in information flows over corporate computer networks, and its potential effects on the regional geography of enterprise and of the economy more generally. This leads us to reflect on what new considerations should enter into regional policy-making for the information economy, including the central role of advanced telecommunications infrastructure.     

Pricing flexibility under rate-of-return regulation: Effects on network infrastructure investment

When a commodity market relies upon a regulated network service industry—e.g., telecommunications, electricity, or natural gas transmission—economic efficiency in that commodity market is a crucial consideration for regulatory design. This is because insufficient infrastructure investment relative to network demand results in congestion. The extraction of associated rents has distortionary effects on commodity spot market prices. Greater regulatory flexibility in network pricing can alleviate such issues by cultivating the incentives needed for stakeholders to invest in transmission capacity. To illustrate this effect I derive and numerically solve stylized optimality conditions for access and usage prices for a gas pipeline operator under alternative regulatory models. My results have general implications for regulation in network infrastructure industries, as energy and telecommunications markets are expected to expand considerably over the coming decades.     

Trade imbalance in international message telephone services

An econometric model is estimated to identify determinants of trade imbalance in international message telephone services markets. Results indicate that asymmetric market structure is important in explaining bilateral market imbalances for high income country pairs. For low and high income country pairs, GDP per capita is the dominant cause of traffic imbalances. The findings suggest that telecommunications liberalization policies are effective in reducing distortions in international traffic flows and settlement payments. However, liberalization should be accompanied by developmental programmes that enhance income per capita and telecommunications network investment in developing countries. Such programmes may be effective in providing a more equitable distribution of the gains from telecommunications reform across countries.     

Productivity Growth And Market Structure In Telecommunications

This study examines sources of telecommunications sector productivity growth. Total factor productivity (TFP) growth is calculated using the Malmquist productivity index for a sample of 74 countries for the period 1991 through 1995. An econometric model is estimated which relates TFP growth to output growth, network digitisation, telecommunications development, output-mix, the business cycle and market structure. Model estimates suggest that higher digitisation rates dampen TFP growth in the short run, and cross-subsidisation of services creates inefficiency. However, developing countries can increase TFP growth through catch up, and increased privatisation and competition are conducive to productivity growth.     

Critical mass of users versus critical mass of services in a multiproduct information service system

In this paper we study the economic behaviour of the suppliers of a set of advanced telecommunications services with a joint adoption cost (common access facilities, learning process, etc.). In fixing the two-part tariffs for their services the suppliers have to share the burden of leaving to the users a surplus sufficient to cover the adoption cost. The lack of coordination in supplying a critical mass of services or in the pricing decisions has high changes to result in suboptimal or unviable diffusion of the new technology as a whole. We present a static optimization model of user behaviour, and derive access and usage demand with a two-part tariff and a joint adoption cost. We compare noncooperative and cooperative market equilibria in a duopoly with perfect information; finally we discuss the extension of our analysis to the case of imperfect information in a dynamic setting.     

The impact of FDI on host countries: the analysis of selected service industries in the Visegrad countries

Foreign direct investments are substantial in the services sector in the Visegrad countries. In this article, we analyse the impact of FDI on the host economy in four selected service industries in two areas: export and employment. FDI in the four selected service industries differ in terms of their vertical or horizontal nature: in business services FDI is predominantly vertical; in financial services and telecommunications it is predominantly horizontal; while in computer-related service activities both types can be found. According to our results, the impact on the host economy differs in the four service industries. We found a positive and significant impact on exports in vertical business services and in horizontal telecommunications services, and on employment in business services and, to a lesser extent, in financial services. The positive impact either diminished or disappeared during the global recession of 2008–2009. The comparison of the four Visegrad countries demonstrates the heterogeneous intensity and significance of this impact, indicating their different specialisations in the analysed services industries.     

The late take-off phenomenon in the diffusion of telecommunication services: network effect and the critical mass

Telecommunication services are distinctive in that their adoptions are influenced by network effect resulting in the late take-off phenomenon and the critical mass problem. In this paper we examined the late take-off phenomenon in the diffusion process of telecommunication services. We first compared the parameters of the diffusion process of consumer durables with those of fax services in the US and Korea. By analyzing the parameters of a new diffusion model based on the threshold model proposed by Markus, we found that the late take-off phenomenon resulted from the low heterogeneity of the threshold distribution for the potential adopters. A simulation approach was proposed for the theoretical implication of the critical mass problem in the start-up telecommunications services.     

Analyzing technological threats and opportunities in wireless data services

The ability to assess the threat and opportunity that technological innovations pose to an organisation's profitability, growth and survival has become one of the key elements in the development of offensive and defensive innovation strategies. Central to this process of assessing technological threats and opportunities is the need to analyze various aspects of identified technological developments. A range of analysis techniques exists, and a number of these are discussed and simultaneously applied to a specific technological development. While threat and opportunity assessment is relevant to almost any company in any industry, it is especially relevant to industries characterised by high rates of volatility such as the communications industry. The technological development, which has been chosen to apply these analysis techniques to, is the offering of 2.5/3G wireless data services, which is currently of great significance in the communications industry. The point of view that is taken is that of a European mobile network operator (MNO) that needs to assess the threats and opportunities that this development poses to its business. The result shows that the analysis process leads to a better understanding of not only the identified developments, their driving forces and enablers, but also their possible impacts on the organisation. This greatly enables the extent to which developments represent a threat or opportunity for a specific organisation to be assessed. In the framework of the overall technological threat and opportunity assessment methodology, the results of the analysis process will feed into the strategy formulation process where possible organisational responses can be developed.     

On the optimal distribution of traffic of network airlines

Network airlines have increasingly focused their operations on hub airports through the exploitation of connecting traffic. However, in this paper we show that they may also have incentives to divert traffic away from their hubs. More precisely, we examine how the optimal distribution of traffic of network carriers can be affected by the two major recent innovations in the airline industry: the regional jet technology and the low-cost business model. On the one hand, we show that a network airline may find it profitable to serve thin point-to-point routes with regional jets when the distance between endpoints is sufficiently short and there is a high proportion of business travelers. On the other hand, we observe that a network airline may be interested in serving thin point-to-point routes by means of a low-cost subsidiary when the distance between endpoints is longer and there is a high proportion of leisure travelers. We conclude that network airlines are using those innovations to provide services on thin routes out of the hubs.     

Ex ante identification of disruptive innovations in the software industry applied to web applications: The case of Microsoft's vs. Google's office applications

This paper analyzes the question whether web applications pose a disruptive threat to incumbents or a disruptive growth opportunity for entrants in the application software industry using a novel method for ex ante identification of disruptive innovations in the software industry. Building on the theory of disruptive innovations, network effects and existing frameworks for the ex ante identification of disruptive innovations a new method of analysis is deduced. The analysis is based on a list of criteria that indicate a disruptive innovation and trajectory maps of the technologies' performance attributes. This method is applied to study the potential disruption of Microsoft's desktop office applications by Google's web-based office applications.The chosen method of analysis indicates a small likelihood for web applications to pose a disruptive threat to Microsoft, and by extension, to incumbents in the software industry. While web applications show a potential to satisfy market demand in established performance attributes, strong network effects in existing software products should give incumbents enough time to co-opt the innovation. The case illustrates how our new method to analyze disruptive potential in the software industry ex ante can help to apply the theory of disruptive innovation better for forecasting purposes and to provide novel strategic insights for the players involved.     

Political institutions and telecommunications

It has traditionally been argued that the development of telecommunications infrastructure is dependent on the quality of countries' political institutions. We estimate the effect of political institutions on the diffusion of three telecommunications services and find it to be much smaller in cellular telephony than in the others. By evaluating the importance of institutions for technologies rather than for industries, we reveal important growth opportunities for developing countries and discuss venues for alleviating differences between countries in international telecommunications development.     

Entry and Innovation in Maturing Markets: Virtual Operators in Mobile Telecommunications

In the last few years the mobile telecommunications industry has witnessed the entry of a large number of new service providers. Traditionally, mobile users get their mobile services from the service providers owned by vertically integrated mobile network operators (MNOs). The new entrants do not own a network of their own however, because they use the existing mobile infrastructure, i.e. they are 'mobile virtual network operators' (MVNOs). By granting these virtual operators access to their networks, MNOs actually facilitate the entry of potential competitors for their own downstream service providers. These new entrants might attract additional users by offering competitive services and create extra value with their well-known brand names and other complementary assets. This study focuses on the mobile market of the Netherlands, where competition is intense and MVNOs proliferate. The aim of this research is to improve our understanding of the entry of virtual operators in general, and specifically by explaining why and how virtual operators enter the mobile market and the impact they have on competition in the mobile market.     

The evolution of financial intermediation: Evidence from 19th‐century Ontario microdata

Microdata for Ontario decedents in 1892 and 1902 is analyzed to help explain the dramatic growth of the Canadian banking system in the late 19th century. Combining data from probate inventories with census data at the township level, we find that the expansion of deposit banking happened at the extensive rather than intensive margin and was correlated with the expansion of the branch network of the banking system, although we cannot assign causation. Wealth and urbanization help to explain the growth of deposit banking but the significance of a dummy variable for 1902 points to other time‐correlated factors such as innovations in transportation and financial innovations that lowered costs and facilitated access to banking services.     

The usage of VoIP services and other communication services: An empirical analysis of Italian consumers

This paper examines the early stages of VoIP usage by analyzing the relationship between the usage of VoIP services and other voice and non-voice communication services in Italy. In doing so, it aims at filling the gap in the empirical literature on the diffusion of VoIP among consumers and aims at investigating the relationship between VoIP adoption and the usage of telecom and Internet-related services. It relies upon a survey carried out among consumers in Italy in 2006. The use of VoIP is negatively associated with the usage of other voice communication services — mobile communications in particular, but shows some degree of complementarity with other non-voice (Internet-based) communication services, suggesting that familiarity with the web plays a significant and positive role in explaining the adoption of VoIP applications. Furthermore, individual users' technical skills, job position and communications' habits also matter in determining the adoption of VoIP.     

Technological Progress and Economic Growth in Sub-Saharan Africa: Evidence from Telecommunications Infrastructure

This paper investigates the impact of telecommunications infrastructure in Sub-Saharan Africa. We use the World Development Indicators database and apply the instrumental variable-generalized method of moments to a panel of 47 countries over the period 1993–2012. The results show that the Internet and mobile phones have contributed to economic growth. A one percentage point increase in Internet and mobile phone usage raises growth by 0.12 and 0.03 percentage points, respectively. Overall, the results suggest that the development of telecommunications infrastructure fosters economic growth in Sub-Saharan Africa. With much room for potential growth enhancement of telecommunications infrastructure, policies to expand access or reduce cost should be strongly encouraged by African governments, particularly as far as the Internet is concerned.