The Economics of “Wireless Net Neutrality”

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Complementarities and Collusion in an FCC Spectrum Auction

We empirically study bidding in the C Block of the US mobile phone spectrum auctions. Spectrum auctions are conducted using a simultaneous ascending auction design that allows bidders to assemble packages of licenses with geographic complementarities. While this auction design allows the market to find complementarities, the auction might also result in an inefficient equilibrium. In addition, these auctions have equilibria where implicit collusion is sustained through threats of bidding wars. We estimate a structural model in order to test for the presence of complementarities and implicit collusion. The estimation strategy is valid under a wide variety of alternative assumptions about equilibrium in these auctions and is robust to potentially important forms of unobserved heterogeneity. We make suggestions about the design of future spectrum auctions.Technology and Industry

Empirical Study of Effect of Deregulation, Competition, and Contents on Mobile Phone Diffusion: Case of the Japanese 3G Market

The Japanese mobile market has recently shown a remarkable growth in the last decade, with more than 106.2 million 3G (3rd Generation, or W-CDMA) subscribers and 4.4 million 2G (2nd Generation, or PDC) as of December 2009. This paper attempts to analyze factors promoting Japanese mobile phone, focusing on 3G technologies. Factors promoting it can be summarized as follows: (1) deregulations by government, such as MNP (Mobile Number Portability) and collocation; (2) competition among carriers, such as introduction of new charge plans; (3) technological development, such as connection speed; and (4) contents and applications. This paper utilizes the panel data of three main carriers of the mobile phone market, namely, NTTdocomo, au (KDDI), and Softbank. As for a model for estimation, we apply that of Madden and Coble-Neal [2004] which studied the relationship between fixed and mobile phone with the panel data by the dynamic random effects estimation. Dynamic models are based not only on the assumption such that carriers do not instantaneously adjust to satisfy their long-term demand but also on network externalities. Besides, the paper applies a dynamic panel data model in order to take care of the endogeneity problem. This paper deals with this problem rigorously by applying Arellano-Bond estimator (Arellano and Bond [1991] and Arellano and Bover [1995]) which estimates exogeneous or predetermined variables, in addition to instrumental variables, using the two-step generalized method of moments (GMM). Based on this framework, this paper identifies service innovations such as entertainment, flat rate charges are found significant for the 3G mobile phone diffusion. --dynamic panel data analysis,competition policy,network externalities,endogeneity,m-commerce,e-entertainment,MNP

Would You Like that iPhone Locked or Unlocked?: Reconciling Apple's Anticircumvention Measures with the DMCA

When Apple's iPhone first hit the stores it was an epochal media event.2 Apple, long a leader in high-end computers and personal electronics, was poised to make its entry into a highly-competitive market with a new mobile phone that promised groundbreaking technological capabilities in a sleek, ergonomic package. Apple's CEO, Steve Jobs, extolled the iPhone's virtues to an eager press, and, shortly thereafter, Apple's stock jumped dramatically.3 Apple's loyal devotees lined up in anticipation days before the phone's June 29, 2007 release.4 It took Apple a mere seventy-four days to sell one million handsets.5 But some time after the fanfare had settled down, public perception of the iPhone shifted. As consumers began to use the iPhone, the once-beloved phone began to acquire its share of discontents. Consumers expressed frustration in response to 300-page phone bills,6 expensive roaming charges,7 and, perhaps most vocally, to the technological methods Apple used to police its exclusive agreement with AT&T

Sequences of purchases in credit card data reveal life styles in urban populations

Zipf-like distributions characterize a wide set of phenomena in physics, biology, economics and social sciences. In human activities, Zipf-laws describe for example the frequency of words appearance in a text or the purchases types in shopping patterns. In the latter, the uneven distribution of transaction types is bound with the temporal sequences of purchases of individual choices. In this work, we define a framework using a text compression technique on the sequences of credit card purchases to detect ubiquitous patterns of collective behavior. Clustering the consumers by their similarity in purchases sequences, we detect five consumer groups. Remarkably, post checking, individuals in each group are also similar in their age, total expenditure, gender, and the diversity of their social and mobility networks extracted by their mobile phone records. By properly deconstructing transaction data with Zipf-like distributions, this method uncovers sets of significant sequences that reveal insights on collective human behavior.Comment: 30 pages, 26 figure

Evaluating Wireless Carrier Consolidation Using Semiparametric Demand Estimation

The US mobile phone service industry has dramatically consolidated over the last two decades. One justification for consolidation is that merged firms can provide consumers with larger coverage areas at lower costs. We estimate the willingness to pay for national coverage to evaluate this motivation for past consolidation. As market level quantity data is not publicly available, we devise an econometric procedure that allows us to estimate the willingness to pay using market share ranks collected from a popular online retailer, Amazon. Our semiparametric maximum score estimator controls for consumers' heterogeneous preferences for carriers, handsets and minutes of calling time. We find that national coverage is strongly valued by consumers, providing an efficiency justification for across-market mergers. The methods we propose can estimate demand for other products using data from Amazon or other online retailers where quantities are not observed, but product ranks are observed. Since Amazon data can easily be gathered by researchers, these methods may be useful for the analysis of other product markets where high quality data are not publicly available.Technology and Industry

Evaluating Wireless Carrier Consolidation Using Semiparametric Demand Estimation

The US mobile phone service industry has dramatically consolidated over the last two decades. One justification for consolidation is that merged firms can provide consumers with larger coverage areas at lower costs. We estimate the willingness to pay for national coverage to evaluate this motivation for past consolidation. As market level quantity data is not publicly available, we devise an econometric procedure that allows us to estimate the willingness to pay using market share ranks collected from a popular online retailer, Amazon. Our semiparametric maximum score estimator controls for consumers%u2019 heterogeneous preferences for carriers, handsets and minutes of calling time. We find that national coverage is strongly valued by consumers, providing an efficiency justification for across-market mergers. The methods we propose can estimate demand for other products using data from Amazon or other online retailers where quantities are not observed, but product ranks are observed. Since Amazon data can easily be gathered by researchers, these methods may be useful for the analysis of other product markets where high quality data are not publicly available.

An Antitrust Analysis of the Case for Wireless Network Neutrality

The ongoing debate about possible implementation of regulatory rules requiring “network neutrality” for wireless telecommunications services is inherently about whether to impose a prohibition on the ability of network operators to control their vertical relationships. Antitrust analysis is well suited to analyze whether a wireless network neutrality rule is socially beneficial. Implementing network neutrality rules would be akin to using a per se antitrust rule regarding vertical relationships instead of the rule of reason analysis typically applied to vertical relationships in antitrust. Per se rules are used to prevent actions that rarely, if ever, have any pro-competitive benefits, such as price-fixing agreements. Rule of reason analysis is used when there are potential efficiency gains from the actions under investigation. Some vertical practices of the wireless carriers, such as bandwidth restrictions, may appear to be anticompetitive, but may also have plausible efficiency justifications so should be judged under rule of reason analysis. Economic examination of the wireless industry shows significant competition between networks which reduces the concern about vertical relationships, but some areas that should be monitored by antitrust and regulatory authorities. We propose several regulatory changes that would likely increase wireless competition and lessen the perceived need for prophlactic network neutrality rules while at the same time allowing efficiency-enhancing vertical relationships.network neutrality, wireless internet, antitrust,

Cooperation for Innovation in Payment Systems: The Case of Mobile Payments

In this paper, we provide a definition of mobile payments and we analyze the markets that could be targeted by mobile payment service providers, both in developed and in developing countries. Focusing on the case of developed countries, we introduce five cooperation models that have emerged or could emerge between banks, mobile network operators, and payment systems, for the development of this payment method.mobile payments; payment systems; mobile banking; mobile commerce.

The Role of Peer Influence in Churn in Wireless Networks

Subscriber churn remains a top challenge for wireless carriers. These carriers need to understand the determinants of churn to confidently apply effective retention strategies to ensure their profitability and growth. In this paper, we look at the effect of peer influence on churn and we try to disentangle it from other effects that drive simultaneous churn across friends but that do not relate to peer influence. We analyze a random sample of roughly 10 thousand subscribers from large dataset from a major wireless carrier over a period of 10 months. We apply survival models and generalized propensity score to identify the role of peer influence. We show that the propensity to churn increases when friends do and that it increases more when many strong friends churn. Therefore, our results suggest that churn managers should consider strategies aimed at preventing group churn. We also show that survival models fail to disentangle homophily from peer influence over-estimating the effect of peer influence.Comment: Accepted in Seventh ASE International Conference on Social Computing (Socialcom 2014), Best Paper Award Winne