Diffusion of Mobile Telephony in China: Drivers and Forecasts

Abstract

Analyzing mobile telephony diffusion involves identifying drivers and forecasting growth using a growth model. However, to our knowledge, no framework for model selection exists. To eliminate ad hoc model selection, this study presents a novel model-comparison method based on an analysis of mobile telephony diffusion in China, which accounts for one-fifth of global mobile telephony subscriptions. Determinants of the diffusion rate are then analyzed using the most appropriate model identified by the proposed model-comparison method in terms of minimum root-mean-square error. Empirical results identify the Gompertz model as the best model for diffusion forecasting. The three most significant determinants are low-cost mobile handsets, prepaid services, and personal handy-phone system (PHS) services. All of these determinants contribute to meeting the demand in China's low-end market. This study combines the proposed model-comparison method with estimates of determinants of diffusion rate to improve analysis and forecasting accuracy for mobile telephony diffusion. Moreover, model comparisons using data from eight representative countries (Brazil, China, France, Germany, India, Russia, the U.K., and the U.S.) provide a valuable reference for model selection for mobile telephony diffusion.