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.     

Analysing diffusion pattern of mobile application services in Korea using the competitive Bass model and Herfindahl index

Mobile service has been totally revolutionizing the service industry with the explosive growth in mobile application (‘app’) services. With the rapid proliferation of mobile app service, there is still a constant need for the research focusing on the precise and scientific prediction of the diffusion of mobile app service with consideration of competitive relationships. However, most of the relevant research dealing with diffusion did not consider the competition effect among mobile app services. In addition, in mobile app services, big competitors, which have a larger marketing share in same category, can interrupt the diffusion of other mobile app services significantly. Thus, the level of competitiveness also should be considered for more precise prediction of mobile app service. Accordingly, the present study proposes a new approach to analyse the degree of competitiveness of mobile app service categories using Herfindahl–Hirschman index and classify mobile app service categories. Then, this study systematically analyses their respective diffusion patterns based on the given empirical data using competitive Bass model. A case of Korean mobile service industry is presented to illustrate the proposed approach.     

Competing risk model for mobile phone service

Since the Korean government implemented the “Number Portability System” in the domestic mobile communications market, mobile communication companies have been striving to hold onto existing customers and at the same time to attract new customers. This paper presents a competing risk model that considers the characteristics of a customer in order to predict the customer's mean residual life under the “Number Portability System.” Competing causes for churning considered are pricing policy, quality of communication, and usefulness of service. It has been observed that the customers who pay more are less sensitive to pricing policy; younger people are less sensitive than older people to the change of the quality of communication; and women are more sensitive than men in terms of usefulness of service. We expect that the result of this study can be used as a guideline for effective management of mobile phone customers under the number portability system.     

Analysis on the growth of telecommunication services: a global comparison of diffusion patterns

With the development of the Internet, the telecommunication market has seen a rapid shift from voice-based services to data-based services. Relationships of substitutability and complementarity have emerged among communications technology services such as Internet service, mobile phone service and fixed telephone service. The article analyses the diffusion patterns of communication services in different continents. A modified logistic growth model is estimated using panel data for the years 1975–2004. The research forms a valuable framework for forecasting demand for new services based on the diffusion of incumbent services and can inform strategies for entering the communications network industry.     

Mobile communications in China: levels of technological dynamism

This paper examines the technological capability of the Chinese mobile communications sector. First, a framework is established to measure static and dynamic capabilities at the service operator level. Using this framework, two service operators, China Mobile and China Unicom, were tested. Four key factors (the regulatory system, home demand, levels of competition and the corporate governance system) are explored through discussion with government organisations, research institutes and the two service operators – all influence the development of operators’ dynamic capabilities. The research suggests that the mobile communications industry in China has devoted considerable resources and effort to developing static capabilities. However, dynamic capabilities are impeded by an inadequate regulatory system, insufficient competition, unsophisticated home demand and an ineffective corporate governance system.     

Exclusive contents and next generation networks

This paper analyzes the interaction between the market of contents and the development of the next generation network (NGN) industry. We assume structural separation between the network and service operators and the comparative advantage of the service operators depends on the access to premium contents. On one side, we analyze how the structure of the market of contents (the scope of exclusivity contracts) may affect deployment and competition in a NGN setting. On the other side, we endogenize the structure of the market of contents given the presence of NGNs, where a content provider can sell contents directly to consumers, by-passing telecom operators (disintermediation, over-the-top content). In this context, we show that exclusivity only occurs when the content is not highly valued by consumers. Finally, the implication of our analysis for the evolution of the telecommunications industry is discussed.     

Technology transfer in the IT industry: A Korean perspective

Recently Korean Government announced ambitious IT strategy to establish Korea as one of leaders in world IT market. To implement this strategy, technology transfer from research lab to market should be successfully performed. This study is to identify factors influencing technology transfer and to examine contribution of these factors on success of technology transfer in Korean IT industry. Survey results show that technology project leaders evaluated “Concreteness of Technology” as the most influential factor for technology transfer, followed by “Communication Channels,” “Collaboration among Participants,” “Management Support,” “Government Support,” and “Incentives for Transfer.” Out of 135 technology transfer projects, respondents rated 33 projects as sustaining (28.44%), 38 as promoting (28.15%), 26 as demonstrating (19.26%), 27 in incubating (20.00%), and the remaining 7 in imaging stage (8.15%). This statistics means that 28.15% of technology transfer projects did not reach production stage. Regression analysis identifies that “Communication Channels,” “Management Support,” “Concreteness of Technology” “Sense of Common Purpose,” and “Awareness of Technology Transfer” were statistically significant in explaining success of technology transfer.     

The forecasting of the mobile Internet in Taiwan by diffusion model

From the government's perspective, it is very important to estimate the growing path of the mobile Internet market and then to forecast the trend. The purpose of this paper is to propose a diffusion model that reveals the growth pattern of the mobile Internet subscriber in Taiwan utilizing the concepts of the “technical substitution” and the “multi-product competition”, which suits the characteristics in the mobile Internet market in Taiwan. From the regression results, the estimated ultimate market potential of GPRS is 6.4 million, which is going to saturate in about 2008Q1. On the other hand, the estimated range of the market potential of PHS/3G is about 7.2 to 8.0 million. That is, the total mobile Internet market in Taiwan is forecasted to be around 13.6 to 14.4 million subscribers.     

Can price discrimination improve the performance of online retail platforms?

Online retail platforms are the core of online retail activities, but due to increased competition among the platforms, traditional sources of revenue such as the membership and transaction fees alone cannot guarantee platform profitability. Thus, platform enterprises are looking for other sources of revenue. In this article, we focus on the role of value-added services fees charged by platforms. Specifically, we show that price discrimination exercised by platform enterprises in value-added services fees can increase the user access scale, platform profit as well as the social welfare.     

Unbundling the local loop

We study competition for high bandwidth services in the telecommunications industry by introducing the possibility of unbundling the local loop, where leased lines permit the entrant to provide services without building up its own infrastructure. We use a dynamic model of technology adoption and study the incentives of the entrant to lease loops and compete “service-based”, and/or to build up a new and more efficient infrastructure and compete “facility-based”, given the rental price.We show that the incumbent sets too low a rental price for its loops; hence, the entrant adopts the new technology too late from a social welfare perspective. The distortion may appear not only on the timing of technology adoption but also on the type (quality) of the new technology to be adopted. We also show that while regulating the rental price may suffice to achieve socially desirable outcomes, a sunset clause does not improve social welfare.     

The digital economy: Where do we stand?

The rapid transition towards a “digital economy” was enabled by a converging set of innovations. Computing saw the development of the semiconductor transistor, integrated circuit, personal computers (PCs), operating systems, and graphical interfaces. The physical layer of telecommunication was enabled via the emergence of optical fiber and new wireless communication technologies, while networking saw the development of the Internet (essentially packet switching) and the World Wide Web. These advances combined to realize a series of new applications of information and communications technologies (ICTs) such as business software, e-mail, and e-commerce. However, progress seriously stumbled with the collapse of the dot com bubble, which among other things revealed a huge amount of misdirected investment that could have been used more productively. The question of the day is thus how to realize new “killer apps” to stimulate a new round of growth. The use of cell phones for communicating text, pictures, and video is a rapidly expanding area, but it seems unlikely that these applications will have a macroeconomic impact. Entertainment is a key industry whose fortunes are entwined with ICTs. Indeed, the application of ICT to innovating entertainment products is an important driver for the continued growth of the industry. Distribution of music and video via the Web could significantly stimulate demand but also raises the thorny question of how to protect intellectual property rights (IPR) of content providers. Another possible killer apps are interactive video-on-demand and telecalls/teleconferencing. The latter would, among other things, stimulate adoption of telework. The current Internet is capable of handing neither one-way transmissions of high-quality video nor interactive video-on-demand. There are bottlenecks both for the “last mile” connection from Internet service provider (ISP) to the home but also the “first miles” from originating server to ISP. The effective first miles bandwidth has not increased along with improvements in equipment, essentially because demand increases with capacity and thus traffic jams on the net continue. Digital subscriber line (DSL) technologies over telephone wires, and possibly wireless networks, will play important roles in getting over the last mile hurdle. Upgrading the first miles will probably require new networking protocols beyond TCP/IP that support multimedia and also changes in the economic model of information transfer via the Net.     

提升河北省财政竞争力策略研究

与其他省(市、区)相比,河北省在财政收入竞争上占有一定优势,但由于公共服务提供水平较低,从而其财政综合竞争力处于劣势。提升河北省财政竞争力的战略选择应“以厚税基—低税费负担—高公共服务”为基本政策取向,以非财税手段吸引流动性税基为战略切入点,以此为基础,加强财政支出管理、吸引民间资金对地方混合性公共物品的投入和争取中央财政转移支付资金的支持。     

The evolution of Internet interconnection from hierarchy to “Mesh”: Implications for government regulation

The Internet has evolved from a “hierarchy”—in which interconnection was achieved by having Internet Service Providers (ISPs) purchase transit services from top-level backbones and top-level backbone providers engage in direct settlement-free peering—to a “mesh” in which peering occurs among a much larger number of participants and some peering arrangements involve payments from one peer to another. In this new environment, backbone providers, ISPs, and suppliers of content have a far wider array of interconnection alternatives, both technical and financial, than they did only a short time ago. As is often the case, the introduction of new alternatives and contractual arrangements has led to calls to regulate which alternatives and arrangements are acceptable. In this paper, we explain why such regulation would be harmful, as it would (i) reduce the incentives of industry participants to minimize total costs; (ii) lead to higher access prices to end users; (iii) result in prices that do not adequately reflect costs; and (iv) create regulatory inefficiencies. We also explain why the alternative interconnection arrangements to which Content Delivery Networks (CDNs) (and their content provider clients) and ISPs generally have access already impose limits on the exercise of market power, thus obviating any need for regulation.     

SP外资买卖行为的博弈分析

针对国外投资者通过各种手段租借(或变相租借)国内SP经营许可或特服号码投资增值电信服务业的现象,在不完全信息条件下构建国内SP与外资企业间的博弈模型,分析博弈均衡(租出,租借),(不租出,直接投资)出现的条件,揭示SP外资买卖行为普遍蔓延的原因;指出政府管制的方向是加大惩罚与监管力度,提高服务质量,放松外资进入管制;表明政府应及早采取措施控制此类现象的蔓延。     

Identifying the structure of knowledge networks in the US mobile ecosystems: patent citation analysis

With the emergence of smartphones, the paradigm of the mobile ecosystem has changed rapidly. In particular, global mobile firms focus on technological competition when jostling for market position in recognition of the strategic need to secure a strong mobile platform. In this paper, we analyse the network structure of technological knowledge flows in mobile ecosystems using US patent citation information. We find that two subsectors, platform providers and application and software providers, are at the centre of knowledge exchange activity and play a brokerage role as the key knowledge mediator. Then, we categorise mobile firms into five different groups based on the patterns of their network centrality: knowledge keystone players, knowledge-distributing mediators, knowledge-absorbing mediators, catch-up players, and pure knowledge receivers. The categorisation of firms demonstrates that knowledge flows in the mobile industry converge towards a few leading firms, and such patterns are shaping the mobile ecosystem with respect to technological knowledge. The firms categorised as catch-up players have played a brokerage role within their group, while the firms categorised as knowledge keystone players play a brokerage role across different groups.     

Mobile phone termination charges with asymmetric regulation

We model competition between two unregulated mobile phone companies with price-elastic demand and less than full market coverage. We also assume that there is a regulated full-coverage fixed network. In order to induce stronger competition, mobile companies could have an incentive to raise their reciprocal mobile-to-mobile access charges above the marginal costs of termination. Stronger competition leads to an increase of the mobiles’ market shares, with the advantage that (genuine) network effects are strengthened. Therefore, ‘collusion’ may well be in line with social welfare.      

The take-off of an interactive innovation: Evidence from China

An interactive innovation can be defined as an end-user application which is subject to network effects at both the demand and supply sides. As a result of network effects, the diffusion of such an innovation is predicted to follow a take-off curve coinciding with the advent of a critical mass of adopters. The current literature on innovation diffusion, mainly focusing on the demand-side dynamics, such as information cascades and herding behaviors among potential adopters, is not sufficient to explain the take-off (or the failure) of interactive innovations. In this paper, we present and examine a case study of the take-off of an interactive innovation, namely the caller-ring-back-tone (CRBT) and mobile music - mobile value-added services (MVAS) - in China. We find that supply-side dynamics, such as choices of platform strategies, helped drive the take-off of this innovation within China's institutional boundaries. The paper makes a contribution in two ways: first, it presents an ‘inside-out’ view of a unique case of take-off phenomenon; and, second it provides an integrated view combining factors from both the demand and supply sides to explain the take-off phenomenon, which is rare in empirical studies.     

New functionality development through follower substitution for a leader in open innovation

There has been a paradigm shift to a knowledge-oriented economy in the 21st century. Consequently, there has also been a shift in where innovation typically occurs. This shift has been from the production site toward the process of product diffusion. That is, innovation occurs more frequently at the point at which a product or service is moved into the marketplace where it is immediately modified through customer interaction. In this process, new “functionality” — services, the delivery method or even product changes occur in the diffusion process. Given the need to constantly create new value through new product “functionality” or new “functionality development”, firm strategy must address the issue of how to enhance innovation at this new locus — the diffusion process. Sustainable new functionality development over time has become crucial to a firm's competitiveness. In this context, firms have to develop new functionality as early and quickly as possible; leveraging whatever innovation exists in the marketplace. According to theory, the early emergence of functionality development in this context depends on a dynamic system in which the imitator (follower) is constantly substituting for the innovator (leader). This substitution corresponds to the dynamics observed in the process referred to as “open innovation”. According to this theory, functionality development through follower substitution for a leader would be critical for a firm's competitiveness in the open innovation environment. Furthermore, open innovation could be a process for sustaining the ongoing creation of new value through functionality development maximizing limited resources. This paper attempts to demonstrate this hypothesis through an empirical analysis of this process of substitution in major innovative goods and services in Japan.