DP2440 The Evolution of Markets Under Entry and Standards Regulation - The Case of Global Mobile Telecommunications

Author(s): Harald Gruber, Frank Verboven
Publication Date: April 2000
Keyword(s): Capacity Constraints, Consumer Switching Costs, entry regulation, Mobile Telecommunications, Network Externalities, Pre-Emption, Standards And Competing Systems, Technology Diffusion
JEL(s): L10, L86, O30
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2440

We analyse the effects of government policies, such as entry regulation and standard setting, on the evolution of an industry, the global mobile telecommunications markets during 1981-1997. Among other results, we find that countries that issue first licenses at later dates converge rather slowly and only partially, compared to early-moving countries. We find that introducing competition has a strong immediate impact on the diffusion rate, but a rather weak impact afterwards. Sequential entry is preceded by pre-emptive behaviour. These findings are consistent with the presence of consumer switching costs. Concerning standards, we find that setting a standard has a significant positive impact on diffusion for the analogue technology, but not for the digital technology. This suggests that the network advantages from having a single standard are offset by the benefits derived from the battle for developing more efficient digital systems.