Competition and Innovation in Telecom Sector: Empirical Evidence from OECD Countries

Abstract

The paper aims to analyze effect of competition and innovation in OECD next-generation mobile phones (as a proxy for telecom sector) by examining factors affecting diffusion pattern. A rigorous econometric model is estimated using mobile telecommunications panel dataset comprised with 19 OECD countries where at least 80% data are covered. The econometric model categorizes variables as: (1) GDP per capita income and mobile user cost, (2) competition policies (3) telecom infrastructure (4) technological innovations (5) others such as role of MVNO (mobile virtual network operators), multiple standards for 3G as for appropriateness of outcome. The study represents country specific influence in terms of mobile contents and technological innovations. A new and important empirical finding is that there are still many opportunities available for mobile network operators (MNO) in this region by providing better telecom infrastructure to support technological innovations and to upheaval decreasing trend of average revenue per user (ARPU). Besides, most important factors are identified as high speeds and necessary time require for porting mobile number.Keywords: Next-Generation Mobiles; Technological Innovations; Competition Policy, Panel Data Analysis; Standardization(ProQuest: ... denotes formulae omitted.)1 IntroductionAfter digital mobiles, third generation (3G) technology around world have come across to a new platform of debate among regulators and policy makers. With an opti-mistic view, developed countries around world have taken first initiative to allo-cate 3G spectrum for proper deployment and to meet criteria of IMT-2000 as standard-ized by International Telecommunication Union (ITU). Although digital mobiles have ensured faster growth and reached toward saturation within a decade or less, but a dif-ferent phenomenon is observed for 3G tech-nologies accept Japan and Korea. Still, sev-eral important issues are unobserved and dif-ficult to determine what factors have signifi-cant effect on next-generation mobiles.As Dippon [1] mentioned, yet, why is case that only two countries, Japan and Ko-rea, have more 3G than 2G subscribers? Sim-ilarly, why do leading nations, like U.S., U.K., and Germany, have 3G penetration rates of less than 30%? The statements are in some extent difficult to answer, while (2007) [2] mentioned the Japanese and later other service providers solved first startup problem for mobile Internet (mobile Internet uses proxy for 3G) with entertain-ment content that was supported by a micro-payment system (service providers collect and pass on content fees to content providers) and customized handset that enabled to dis-play this content in a consistent manner, while Western service providers were slow to introduce micro-payment systems and enter-tainment content due to their initial focus on business users. Although statement of Funk is backward but it provides two inter-esting points for mobile Internet deployment such as: entertainment content and micro-payment systems. Abu [3] empirically ana-lyzes 3G deployments in Japan and identified technological innovations such as electronic payment; high-speed access and entertain-ment services are important factors for success of 3G technology. Policy issues, for example mobile number portability (MNP), pay little attention for 3G deployment. Also, 3G penetration is not only question of quantity but also quality. Recent study on broadband gap by Vicente and Gil-deBernabe [4] mentioned, good is it? How And, how fast is fast? and identi-fied that Japan is found to be only coun-try of 42 countries studied currently pre-pared to deliver quality required for next-generation web applications over next 3 to 5 years in order to meet Broadband Quali-ty Score-an index that combines three key performance parameters for quality of a connection (upload and download speeds, and latency). …