Accounting for ARPU: New evidence from international panel data

Average revenue per user (ARPU) is commonly used by regulators and industry observers to compare the performance of mobile telephony markets. Under the new EU electronic communications regulatory framework, some national regulatory authorities (NRAs) have linked higher ARPU with ‘significant market power’. This paper empirically examines the determinants of ARPU in a systematic way, taking account of service quality, market environment, regulation and quantity of service. The robust results suggest that concentration may not be a reliable indicator of competition in mobile markets; there are economies of density in mobile markets; and higher GDP per capita increases ARPU.     

Regulation and competition in the European mobile communications industry: An examination of the implementation of mobile number portability

Over the past two decades, the mobile communications industry has seen a considerable drop in the consumer switching charges made by service providers in order to promote effective competition and ensure a level playing field for new market entrants. Mobile Number Portability (MNP) is an important regulatory measure taken to reduce switching costs, and it is believed to play an important role in fostering competition in the mobile market. MNP implementation has varied significantly across European Union countries, particularly with respect to porting time and customer fees, both of which are important factors when deciding whether to switch to another provider. The research examines the effects of MNP implementation on competition in the European mobile communications industry. The study findings indicate that subscriber churn rates are negatively affected by both the level of charges levied on subscribers wishing to maintain their current number (porting) when switching mobile providers and the length of time required to switch. The implications of the effectiveness of MNP regulation for competition in the mobile communications industry are discussed.     

Net neutrality and market power: The case of South Africa

Net neutrality rules have been implemented in many developed countries, often in response to concerns over network operator market power and potential blocking or throttling of content. However, developing countries typically have significantly lower levels of internet penetration and usage. Market power in respect of internet access looks quite different given that mobile is the predominant means of connection and there are often three or more mobile operators. In South Africa, there is a quasi-monopoly in the paid satellite broadcasting market and broadband providers zero-rating content from third parties (such as Netflix) may bring about more competition. We test the main theories of harm arising in the net neutrality debate, including network operator market power and exclusion among content providers using data on the number of announced prefixes and peers and IP addresses and considering examples of bundling and zero-rating conduct by operators. We find that net neutrality rules are less likely to be required in South Africa and other developing countries and that strict enforcement of such rules could in fact hinder competition in markets for content, telecommunications networks and other related markets.     

Customer retention,loyalty, and satisfaction in the German mobile cellular telecommunications market

Customer retention (CR), loyalty (CL), and satisfaction (CS) are important (intermediate) goals for telecommunication network operators on their way to superior economic success in the liberalised German market. Therefore, drawing on a sample of 684 residential customers of digital cellular network operators in Germany this study tests hypotheses suggesting that CR, CL, and CS should be treated as differential constructs which are causally inter-linked. LISREL analyses support a two-staged model in which overall CS has a significant impact on CL which in turn influences a customer's intention to terminate/extend the contractual relationship with his mobile cellular network operator (=CR). Mobile service price and personal service benefit perceptions as well as (lack of) number portability between various cellular operators were identified as supply-related variables with the strongest effects on CR. Mobile network operators’ perceived customer care performance had no significant impact on CR. The findings suggest that an important lever for regulators to promote competition in cellular markets is the enforcement of efficient number portability procedures between mobile network operators.     

Evaluating the efficiency change and productivity progress of the top global telecom operators since OTT's prevalence

The telecommunications industry has undergone significant evolvement from fixed to mobile substitution (FMS) to fixed mobile convergence (FMC) and now to over-the-top (OTT) services due to the huge rise in data usage. This paper explores efficiency variation during the period 2012–2017 for the top 41 global telecom operators in Forbes Global, 2000. Based on the data envelopment analysis (DEA) meta-frontier approach to reflect differences in production functions, the empirical results herein show that the number of operators achieving technical efficiency with respect to the meta-frontier fell from 13 firms in 2012 to 10 firms in 2013 to 8 firms in 2014 to 8 firms in 2015 and then to 7 firms in 2016, but then rose to 11 firms in 2017, displaying the impact from rise in OTT. For the mobile-only group, the average technical efficiency with respect to the meta-frontier is 0.841, which is superior to the fixed-mobile group's 0.774 and the fixed-only group's 0.714, and the group difference is significant among the three facilities-based groups. The meta-frontier estimation suggests that the fixed-mobile group has the highest meta-technology ratio (MTR) of 0.901 versus the mobile-only group's 0.886 and fixed-only group's 0.718. The empirical results offer policy implications for regulators to encourage telecom operators to have fixed-mobile operations. We further suggest that telecom operators cooperate with OTT service providers and invest in them in order to take advantage of people's more personalized digital life.     

Zero-rating arrangements of mobile Internet access service providers – An analysis of main factors shaping the need for regulatory interventions

Zero-rating is the practice of providers of radio-based Internet access for moving telecommunication devices of excluding traffic generated by specific online applications from usage counted towards capped allowances or strictly metered tariffs of their end customers. Worldwide and particularly in the European Union (EU), current regulatory frameworks for zero-rating arrangements (ZRA) imply that regulators have to examine on a case-by-case basis whether they prohibit a concrete ZRA or impose restrictions. Such conditions are set because regulators believe that a ZRA runs counter to the interests of end customers or application providers or impedes effective competition between application and Internet service providers. Thus, it is necessary to clarify which case features ought to be inspected in such zero-rating assessments and which feature levels speak against or in favor of regulatory measures linked to ZRA. The present article identifies nine design features of ZRA, three characteristics of customer groups targeted by such offers and three background characteristics of the markets for Internet access services and applications which are of special importance in decisions concerning the need to regulate (to abstain from regulating) zero-rating practices of mobile network operators. The analysis shows that in many instances interests of end customers, application providers as well as of politicians seeking to promote the competitive dynamics on mobile Internet access service and application markets are best served if regulatory authorities tolerate ZRA and control for potential harmful effects after their market launch. Moreover, the study reveals that empirical research on customer reactions to ZRA is urgently required.     

Pull-and-suck effects in Taiwan mobile phone subscribers switching intentions

This paper uses a binary logit model to investigate the factors that influence subscribers to stay or migrate based on the competitive nature of Taiwan's mobile phone industry and subscribers' habit formation regarding service providers. The results show that subscribers' satisfaction, switching costs, and habit strength negatively influence switching intentions, constituting a sucking effect that motivates subscribers to stay with their original providers. Alternative attractiveness, on the other hand, positively influences switching intentions, comprising a pulling effect that encourages subscribers to migrate to other providers. In spite of the promotional benefits offered by new service providers, Taiwanese mobile phone subscribers generally remain with their original providers. For instance, when subscribers perceive that there are no significant influences between service satisfaction and switching costs associated with different providers, what encourages subscribers to stay with their original providers is habit strength. Oftentimes, it is difficult for subscribers with strong habits to be attracted by promotions offered by alternative service providers. Because the concepts of suck-and-pull effects or habit-and-competition forces are infrequently studied, this paper explores these concepts and attempts to fill the void.     

Business ecosystem strategies of mobile network operators in the 3G era: The case of China Mobile

In order to define the mobile network operators' strategies of building value network in the 3G era, this paper applies the ecosystem principles to the mobile industry through a China Mobile case study. Based on an analytical framework of such principles, this paper reviews China Mobile's ecosystem, and identifies its success factors and problems. The results indicate that a complete ecosystem, where mobile network operators collaborate closely with value-added service providers, content/application providers, equipment and device manufacturers, and other involved organizations, can promote the development of mobile data services substantially. Therefore, mobile network operators should play a central role in the ecosystem by managing the entire value-chain and setting up proper value-sharing mechanisms. However, while doing so, problems may arise because of regulatory issues and information asymmetry. High-value common assets, a centralized management system, partner selection schemes and continuous innovations are important success factors.     

Toward universal telephone access: Market progress and progress beyond the market

The last 10 years have seen an explosion in access to telephone services worldwide based on rapid technology advance in increasingly competitive markets. The mobile phone has driven expansion in subscribers and access, especially in the developing world. This paper estimates global mobile footprint coverage based on 2002 data and calculates that as much as 77 percent of the world's population may live in an area covered by a mobile signal. Nonetheless, many people remain without access to telephony. The paper estimates the maximum likely cost in terms of cross subsidy within the industry and outside financing for achieving universal access using competitively awarded subsidies to private providers in a reformed market. This upper-end cost is estimated at $5.7 billion, with costs that could not be supplied by a reasonable tax on existing providers (and so required from outside the sector) estimated at $1.8 billion.     

Differences in consumer loyalty and willingness to pay for service attributes across digital channels: A study of the Japanese digital content market

In this paper, the impact that the Internet access device has on consumer loyalty behaviors relative to Internet content was explored. To do so, a mixed logit demand function for mobile and PC subscribers to digital content was estimated and consumers’ willingness to pay for attributes related to specific content providers and their levels of service quality were measured. It was found that significant differences in loyalty and willingness to pay for service quality factors existed between mobile and PC Internet content subscribers, suggesting that while content may be developed as device independent, consumers interact differently with similar Internet content accessed through different devices. Specifically, the willingness to pay for more robust and more frequently updated content was on average higher in the mobile segment than in the PC segment. In addition, the overall switching costs consumers attributed to specific content providers via the mobile channel were far higher than through the PC channel. These results suggest that more robust content management systems must be developed to accommodate for such differences in consumer behavior.     

Governing online platforms: Competition policy in times of platformization

This paper argues that a paradigmatic change in competition policy is needed and empirically under way to cope with the challenges posed by economically strong online platforms and their big-data-based business models. Competition policy needs to move further away from its traditional price-oriented emphasis and increasingly focus on non-price competition, on attention markets and zero prices, and on big user data, which has become a new asset class in digital economies.     

Incumbents,technological change and institutions: How the value of complementary resources varies across markets

This article examines the influence of complementary resources on the performance of incumbents after a radical technological change. In investigating this relationship, we join the technological management literature and the institution‐based view of strategy and maintain that the value of complementary resources is contingent on the institutional environment in which the firm operates. In particular, we submit that formal institutions, both economic and political, moderate the relationship between the stock of complementary assets and firm performance. We test our hypotheses in the context of the world mobile telecommunications industry (39 countries and 134 mobile service providers). Our findings reveal how these resources are more valuable for incumbents in markets where market‐supporting institutions are weaker and political stability is higher. Copyright © 2014 John Wiley & Sons, Ltd.     

Regulation of international roaming in the European Union—Lessons learned

This paper analyzes the evolution of prices and competition in intra-EU international roaming markets. It addresses three main research questions: (i) to what extent have market forces by themselves brought competition to retail roaming markets? (ii) Has the evolution of market dynamics in wholesale roaming improved competition? (iii) Is wholesale regulation sufficient to lead to a reduction in retail roaming prices? Data show that there has been little price-based competition both at wholesale and retail levels, despite prices being well above costs and the significant margins allowed by regulation. Available data from the period preceding the entry into force of the first EU roaming regulation also point to the same conclusion. Lack of competitive pressure in retail roaming markets and inelastic demand give little incentives for retail roaming service providers to lower prices. Wholesale international roaming markets have complex competition dynamics. They are characterized by the reciprocity of wholesale roaming agreements and traffic internalization inside transnational groups. These circumstances limit price competition at the wholesale level. The traditional regulatory approach applied to electronic communication markets has been primarily focused on wholesale regulation. However, empirical evidence shows that even if wholesale charges are reduced, retail roaming markets continue to operate at very high retail margins (for example, more than 200% retail mark-up over wholesale charges for data roaming services and incoming calls). This proves that in international roaming markets wholesale charge reductions are not necessarily passed on to retail prices. It can thus be inferred that wholesale price regulation alone is in most cases not sufficient to ensure that benefits are passed through to end users.     

The digital divide problem: An economic interpretation of the Japanese experience

This study presents an economic analysis of Japan's attempt to address the geographical digital divide problem for broadband and mobile telephone services. To receive broadband service local inhabitants make voluntary contributions, which are matched by a municipal subsidy. The approach is effective in terms of economic efficiency and equity. Importantly, as fixed broadband service is provided locally the benefits are limited to local inhabitants. By contrast, mobile service is provided via a spectrum user fee system. That is, for mobile telecommunication services, no universal service fund exists. The underlying rationale is that subscribers are beneficiaries and commercial decision-making should be left to mobile operators.     

Foreign Direct Investment,Imports and Innovations in the Service Industry

The paper analyses for the first time empirically the impact of foreign competition due to inward foreign direct investment and imports on the innovation activities using data of German service firms. Based on the hypothesis that foreign competition has a disciplining effect on domestic markets derived from the manufacturing sector, a positive impact can be expected on innovation in the service sector, while other theoretical considerations do not absolutely support this optimistic view. In the empirical analysis, variants of two probit models are estimated for a sample of 2,019 service firms to explain their product and process innovation activities. The results show that both foreign direct investment and imports have highly significant positive effects on product and process innovations. Vice versa, the export and foreign production activities of domestic firms support innovations, too.     

Consumer protection in the telecommunication sector: A comparative institutional analysis of five African countries

The telecommunications sector has proliferated in recent years, especially in developing countries. However, little attention has been paid to consumer protection issues. As more people get connected to telecommunication networks and competition becomes increasingly fierce, it becomes essential to revamp institutions that ensure consumer protection in the telecommunication markets. This paper analyses the current status of institutions that protect consumers in the telecommunications sector in five African countries from the perspective of three pillars of sound institutional design. The findings indicate that while all cases analysed herein have some form of institution that upholds consumer protection, in most cases, such protection is limited to mobile communications. Furthermore, in most cases, there are only general sanction provisions that are either too weak to bind service providers or that leave overly discretionary powers to regulatory agencies, which can lead to corrupt practices, hence weakening consumer protection. This paper describes current affairs with regard to consumer protection in the telecom industry, identifies its weaknesses, and proposes areas of improvement to attain a healthier telecommunications sector.     

International roaming in the EU: Current overview,challenges, opportunities and solutions

As technology evolves and globalization continues, the need for reasonably priced roaming services has never been higher. In 2007, the European Commission (EC) introduced a first set of regulatory decisions to cap the maximal roaming fee end users have to pay for voice services. In the years after, additional price caps have been introduced for SMS and data, initially only for end users, in a later stage also for the wholesale tariff. The final step, Roaming Like at Home (RLAH), will start to take effect in June 2017; from then on end users will pay the same price (for voice, SMS and data) when roaming like in their domestic country.The effect of RLAH on the business case of each mobile operator is hard to predict, as the different national markets are extremely heterogeneous and operators face large discrepancies in terms of roaming usage and network costs due to different travelling patterns and various other reasons that cannot be harmonized (geography, economics, working force, usage history, etc.). Furthermore, competition in the telecom market will no longer be a purely national matter, as the decision to abolish roaming tariffs will fully open up cross-border competition.This paper aims at providing insights in the effect of RLAH for both the end user as well as the mobile operators. Following a literature survey approach, including an overview of the roaming regulation process from 2007 up to now, the paper discusses possible effects the RLAH initiative might trigger, going from lower wholesale prices for mobile operators to higher retail prices for end users. Additionally, as the European Commission strives for a digital single market, this paper presents a number of technical solutions (carrier portability, software-based SIMs, cross-border IMSI, Roaming like a Local, Wi-Fi offloading) that may pose a - partial or full - alternative for roaming and explains how these may impact cross-border competition both positively and negatively. The solutions are assessed against two axes: (1) generating the best possible outcome for the end customers (in all countries) and (2) ensuring the best level playing field for (virtual) mobile operators in Europe, which will of course involve trade-offs on different levels.     

Diffusion of digital mobile telephony: Are developing countries different?

Factors determining the diffusion of digital mobile telephony across developed and developing countries are studied with the aid of a Gompertz model. After controlling for other factors, the speed of diffusion per se is not significantly different between the two groups of countries. Standards competition hinders and market competition promotes diffusion in both groups. Various factors are, however, more important in a developing country context: having a large potential user base, accumulating network effects, being open, commanding a high (non-telecom) technological level, and introducing innovation(s) complementing mobile telephony. Late entrants experience faster diffusion promoting cross-country convergence.