Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Notes on contributors
- Acknowledgements
- 1 Internet economics, digital economics
- Part I Toward a new economy?
- Part II On-line communities
- Part III Network externalities and market microstructures
- Part IV Producing, distributing and sharing information goods
- Part V How e-markets perform
- Part VI Evolving institutional infrastructures
- Part VII The impacts of the Internet at the macro level
- 23 Mobile telephony and Internet growth: impacts on consumer welfare
- 24 Globalization, the Internet and e-business: convergence or divergence in cross-country trends?
- 25 ICTs and inequalities: the digital divide
- References
- Index
23 - Mobile telephony and Internet growth: impacts on consumer welfare
from Part VII - The impacts of the Internet at the macro level
Published online by Cambridge University Press: 22 September 2009
- Frontmatter
- Contents
- List of figures
- List of tables
- Notes on contributors
- Acknowledgements
- 1 Internet economics, digital economics
- Part I Toward a new economy?
- Part II On-line communities
- Part III Network externalities and market microstructures
- Part IV Producing, distributing and sharing information goods
- Part V How e-markets perform
- Part VI Evolving institutional infrastructures
- Part VII The impacts of the Internet at the macro level
- 23 Mobile telephony and Internet growth: impacts on consumer welfare
- 24 Globalization, the Internet and e-business: convergence or divergence in cross-country trends?
- 25 ICTs and inequalities: the digital divide
- References
- Index
Summary
Introduction
Since the early 1990s, mobile telephony and Internet network subscription sustained rapid growth in Europe (Welfens and Jungmittag, 2003). Pricing, technical innovation and regulatory framework change are seen as important to continued network growth. In March 2002, the European Union adopted a package of Directives that significantly revised the 1998 regulatory framework for electronic communications networks and services in Europe. In particular, the new regulatory approach seeks to be responsive to technological and market developments by being more neutral in its treatment of similar services provided via alternative technical means (such as narrowband, broadband and mobile) and by allowing regulation to be withdrawn as effective competition develops (Cawley, 2004). However, as mobile telephony and the Internet are network-delivered services, positive demand externality effects may also be important in explaining such network growth. That is, when network externalities are important, consumers' valuation of network subscription is increased with network size – or equivalently, subscription can expand independently of any change to market conditions. Should network effects be shown to be empirically important in explaining network evolution, they should also be considered in future regulatory framework changes.
This study develops a procedure to determine the importance of network effects. Model estimates provide an annual measure of consumer welfare change for the representative OECD region subscriber. Following Hausman (1981), our model is based on the compensating variation (CV) approach, which consists in assessing welfare improvement due to a price fall as the extra income the consumer would be willing to accept in place of the price fall.
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- Internet and Digital EconomicsPrinciples, Methods and Applications, pp. 651 - 662Publisher: Cambridge University PressPrint publication year: 2007
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