The cost structure of Australian telecommunications

Since 1991 Australian telecommunications has undergone substantial reform. To a large extent, the economic correctness of pro-competitive policy depends on the non-existence of natural monopoly technology. This paper provides estimates of the Australian telecommunications system cost structure, and tests for subadditivity from 1943 to 1991. Additivity of the cost function after 1945 rejects the natural monopoly hypothesis and supports recent government policy. Diminished natural monopoly characteristics suggest that co-ordination between firms through networking can achieve similar economies as internal co-ordination within a monopoly. This finding is important, given the trend towards network unbundling, and service provision through interconnection.Cost structure of Australian telecommunications

Wi-Fi Offload: Tragedy of the Commons or Land of Milk and Honey?

Fueled by its recent success in provisioning on-site wireless Internet access, Wi-Fi is currently perceived as the best positioned technology for pervasive mobile macro network offloading. However, the broad transitions of multiple collocated operators towards this new paradigm may result in fierce competition for the common unlicensed spectrum at hand. In this light, our paper game-theoretically dissects market convergence scenarios by assessing the competition between providers in terms of network performance, capacity constraints, cost reductions, and revenue prospects. We will closely compare the prospects and strategic positioning of fixed line operators offering Wi-Fi services with respect to competing mobile network operators utilizing unlicensed spectrum. Our results highlight important dependencies upon inter-operator collaboration models, and more importantly, upon the ratio between backhaul and Wi-Fi access bit-rates. Furthermore, our investigation of medium- to long-term convergence scenarios indicates that a rethinking of control measures targeting the large-scale monetization of unlicensed spectrum may be required, as otherwise the used free bands may become subject to tragedy-of-commons type of problems.Comment: Workshop on Spectrum Sharing Strategies for Wireless Broadband Services, IEEE PIMRC'13, to appear 201

Telecommunications Technologies: Deployment in Developing Countries

This paper examines some policies pursued in developing countries for the provision of telecommunications services in rural areas. These policies significantly differ from those typically implemented in developed countries in their fundamental objectives, the technological strategies deployed and the market and institutional environments they rest on. A review of some representative experiences suggests that thinking about public utility reforms in this part of the world is quite a challenging exercise. We point out some economic and institutional characteristics of these countries that we believe normative analysis of the reforms should explicitly take into accountTelecommunications; Developing Countries; Universal Access

The Brand is the Bundle Strategies for the Mobile Ecosystem

The current mobile ecosystem is best understood in terms of a monopolistic competition model, characterised by heterogeneous producers providing a range of differentiated products for consumers with heterogeneous preferences. Product differentiation offers producers some market power, ultimately constrained by imperfect substitutes from rivals and the threat of market entry. To achieve their goals, consumers require a mixture of products from the network, handset and application domains. Reduced search and other transaction costs are a demand-side benefit of product bundling. Producers in this market have high fixed costs and low marginal costs. High fixed costs discourage entry, which increases the market power of producers. Low marginal costs and uncorrelated customer preferences across products for individual consumers encourage producers to expand their sales using supply-side bundling. Thus there are strong supply and demand side benefits from product bundling. We argue that producers will compete in terms of differentiated bundles combining network, handset and application features, with branding as the essential strategy for bundle differentiation. Successful business strategies will require direct access to customers and information about their specific preferences. For illustration, we look at the currently apparent strategies of Google, Apple and Nokia. The mobile ecosystem is complex but not unique. Strong parallels can be drawn between the mobile ecosystem and the television ecosystem. Google appears to be following a "free to air" strategy and Apple a "pay TV" strategy in bundle differentiation. Television manufacturers are largely undifferentiated and have little market power: this may be the fate of handset manufacturers and network operators who are comparatively powerless to withstand the evolutionary development of the mobile ecosystem.Business ecosystem, platform, monopolistic competition, product bundling, heterogeneous demand, business strategies, mobile telephony, mobile applications, branding, price discrimination.

Revenue requirements for mobile operators with ultra-high mobile broadband data traffic growth.

Mobile broadband data access over cellular networks has been established as a major new service in just a few years. The mobile broadband penetration has risen from almost zero to between 10 and 15 per cent in Western European leading markets from 2007 to the end of 2009. More than 75% of network traffic was broadband data in 2009, and the data volumes are growing rapidly. But the revenue generation is the reverse as the average for operators in Europe in 2009 was around 77 per cent of service revenues from voice, 10 per cent from SMS and 13 per cent from other data. Voice and broadband data service are built on two quite different business models. Voice pricing is volume based. Revenue depends linearly on the number of voice minutes. Broadband data service on the other hand is mainly flat fee based even if different levels are being introduced as well as tiers. Revenue is decoupled from traffic and therefore also from operating costs and investment requirements. This is what we define as a revenue gap. Earnings as well as internal financing will suffer from increasing traffic per user unless the flat fee can be raised or changed to volume based, other revenue can be obtained and/or operating costs and investments can be reduced accordingly. Observable trends and common forecasts indicate strong growth of mobile broadband traffic as well as declining revenue from mobile voice in the next five year period. This outlook suggests a prospective revenue gap with weak top-line growth and expanding operating costs and investment requirements. This is not only a profitability and cash flow issue. It may also severely restrict the industry's revenue and profit growth potential if it is handled mainly by cost-cutting. In sections 2 - 4 we describe related work, our contribution, the specific research questions as well as the methodology and its problems. Section 5 is an overview of mobile operators' revenue, its sources and development till today. Section 6 presents trends, developments and published forecasts that may be relevant for the future. Section 7 contains our conclusions. --Mobile broadband,mobile operator revenues,revenue requirements,voice revenues,non-voice revenues

Telecommunication reforms, access regulation, and Internet adoption in Latin America

The authors review the stylized facts on regulatory reform in telecommunications and its effects on telecommunications development and Internet penetration in Latin America. Relying on data from the International Telecommunication Union, the Information for Development Program (InfoDev), and the World Bank for 1990-99, the authors then test econometrically the determinants of the differences in Internet penetration rates across Latin America. The results show that effective implementation of the reform agenda in telecommunications regulation could accelerate adoption of the Internet in Latin America-even though it is only part of the solution (income levels, income distribution, and access to primary infrastructure are the main determinants of growth in Internet connections and use). Regulation will work by cutting costs. Cost cutting will require that regulators in the region take a much closer look at the design of interconnection rules and at the tradeoffs that emerge from the complex issues involved. It will also require a commitment to developing analytical instruments, such as cost models, to sort out many of the problems. Appropriate cost models will generate benchmarks that are much more consistent with the local issues and with the local cost of capital than international benchmarks will ever be for countries in unstable macroeconomic situations. Cost cutting will require an equally strong commitment to imposing regulatory accounting systems that reduce the information asymmetrics that incumbents use to reduce the risks of entry. All these changes will ultimately require a stronger commitment by competition agencies, since in many countries a failure to negotiate interconnection agreements will raise competition issues just as often as it will raise regulatory questions.Rural Communications,Information Technology,Telecommunications Infrastructure,Knowledge Economy,Health Monitoring&Evaluation,Knowledge Economy,Information Technology,Health Monitoring&Evaluation,Rural Communications,Education for the Knowledge Economy

Network Externalities and Critical Mass in the Mobile Telephone Network: a Panel Data Estimation

This paper develops a simple demand model with network externalities which allow us to identify the shape of the network externalities function in the mobile telephone market and to estimate the critical mass. If the mobile telephone network exhibits positive network externalities, we expect that the demand curve is not downward sloping everywhere but it has an increasing part, the critical mass of the installed base of subscribers. Once the critical mass is reached, the growth of the network is self-sustaining. We use a panel data of the 30 OEDC Countries from 1989 to 2006 for estimating the relationship between price of 3-minute cellular call and the installed base of subscribers; we find strong network externalities effects in mobile telephone market which drive the demand curve for this network good to be an inverted U function. Moreover, given that the concavity of the demand curve depends on the extent of network externalities, the idea is to identify some variables which could affect the intensity of network effects in the mobile telephone market, because the more concave the demand curve is, sooner the critical mass is reached for any price. This may have important implications for producers in terms of initial investment and marketing strategies which they have to do to attain the critical mass.Network Externalities, Mobile Telecommunication, Critical Mass