Network effects, network structure and consumer interaction in mobile telecommunications in Europe and Asia

Abstract

This paper estimates the importance of (tariff-mediated) network effects and the impact of a consumer"s social network on her choice of mobile phone provider. The study uses network data obtained from surveys of students in several European and Asian countries. We use the Quadratic Assignment Procedure, a non-parametric permutation test, to adjust for the particular error structure of network data. We find that respondents strongly coordinate their choice of mobile phone providers, but only if their provider induces network effects. This suggests that this coordination depends on network effects rather than on information contagion or pressure to conform to the social environment.

Mobile Carrier Selection In A Post-Conflict Environment – The Primacy Of Ethnicity Over Conventional Network Effects

“…In the extension of their earlier study, Birke and Swann (2010) confirm that the respondents coordinate choice of mobile carrier. They also identify the presence of social networks in carrier selection.…”

Tariff-Mediated Network Effects Versus Strategic Discounting: Evidence from German Mobile Telecommunications

“…The idea is that subscribers" utility is not equally increased by every new subscriber joining the network, but rather by the decisions of a small subset like friends and family, also known as "calling clubs" (Birke and Swann, 2010;Corrocher and Zirulia, 2009;Gabrielsen and Vagstad, 2008). This might make on-net discounts less attractive for large operators than in a situation with global network effects because consumers in the same calling club tend to cluster on networks in any case, so high on-net discounts of large operators would not deter entry by small operators.…”

On-Net/Off-Net Price Discrimination and 'Bill-and-Keep' vs. 'Cost-Based' Regulation of Mobile Termination Rates

“…Indeed, when both parties to a call receive benefits from it, setting access charges equal to the cost of completing a call is typically inefficient, and bill-and-keep, by imposing some of the cost of a call on each network, is more efficient than cost-based termination charges. 14 And as we note in Section 3 below, bill-and-keep can be more efficient than cost-based Recent empirical evidence (e.g. Swann 2006, 2007) confirms that tariff-mediated network effects play an important role in mobile telecommunications, and that inducing network effects via off-net/on-net price differentials has been a successful strategy for incumbent mobile operators in Europe.…”

“…101-115; and Armstrong and Wright 2007, pp. [13][14]. The characterization of mobile call termination as a "monopoly" assumes that mobile operators can make "take-it-or-leave-it" offers to fixed-line operators and to each other, which is typically justified by reference to various interconnectivity obligations.…”