Harold Gruber and Frank Verboven

The evolution of markets under entry and standards regulaion - the case of global mobile telecommunications
Keywords: Technology diffusion; Entry regulation; Regulatory delay; Switching costs; Standards and competing systems; Network externalities; Mobile telecommunications
JEL classification: L1; L96; O3

Abstract: We analyze the effects of government policies on the evolution of an industry, the global mobile telecommunications market. (i) We find a relatively slow diffusion convergence between countries. This follows partly from regulatory delay in issuing first licenses, yet persisting initial cross-country differences also contribute to a lack of convergence. (ii) Introducing competition has a strong immediate impact on diffusion, but a weak impact afterwards; sequential entry is preceded by pre-emptive behavior by incumbents. This is a consistent with the presence of consumer switching costs. (iii) Setting a single technological standerd accelerates the diffusion of analogue technologies considerably; for digital technologies, it is too early to draw reliable conclusions, yet the available evidence suggests that setting single standards has similar effects.