The evolution of markets under entry and standards regulation - the case of global mobile telecommunications

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 consistent with the presence of consumer switching costs. (iii) Setting a single technological standard 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 beneficial effects. (C) 2001 Elsevier Science B.V. All rights reserved.