Dear ITS members and friends
,
We welcome you to this years European Regional Conference of the International
Telecommunications Society (ITS) at the Helsinki School of Economics, again in conjunction
with EARIE (European Association for Research in Industrial Economics).
The European regional ITS meetings have a long tradition, with previous events in Madrid
(Spain), Dublin (Ireland), Lausanne (Switzerland), Turin (Italy), Tel Aviv (Israel), Geneva
(Switzerland), Khania (Crete), Budapest (Hungary), Juan Les Pins (France), Stuttgart
(Germany) and twice in Leuven (Belgium). They are complementing the larger biannual ITS
meetings - the14th Biannual took place last year in Seoul, South Korea - and give ITS a more
regional presence. Already regional meetings in North America (together with the ICFC
Conferences) are taking place regularly. Last year we also had regional meetings in Asia and
Australia and again this year and are now trying to establish them in Latin America as well.
As you may be aware, the International Telecommunication Society (ITS) is a long-standing,
independent, non-profit association of professionals (academics and practitioners in operating
companies, consultancies and government agencies) with an interest in the growing field of
telecommunication planning, policy formulation and economic decision analyses. ITS aims
"..to provide a forum where academic , private sector, and government communities can meet
to share research results and solutions to problems, identify pressing new problems and
issues,..." (from the ITS Mission Statement)
On behalf of the program and local arrangement committees we would like to express our deep
gratitude to the authors, who submitted so many abstracts and papers, to the reviewers who
diligently reviewed them and the chairs and discussants who are helping to make this a truly
interactive event. Our thanks go also to the colleagues at the Helsinki School of Economics,
who have invited us to join them in their own task of organizing a much larger EARIE
conference and have allowed us to use their splendid facilities.
Thank you very much for your interest in ITS. We are looking forward to meeting you during
the next few days of the meeting.
Jürgen Müller
Berlin School of Economics
for the Organization Committee
ITS
Europe2003
Special Thanks to our Reviewers:
Special Thanks to the following colleagues who have acted as reviewers
Hasan Alkas, Deutsche Telekom AG
Edmond Baranes, Université de Montpellier
Johannes M.Bauer, Michigan State University
Stefan Bechtold, Universität Tuebingen, Germany
Boris Begovic, Center for Liberal-Democratic Studies
Fernando Beltrán, Universidad de Los Andes
Erik Bohlin, Chalmers University of Technology
Bernardo Bortolotti, Università di Torino and FEEM
Stefan Bühler, University of Zurich - Sozioeconomic Center
Vladimir Bulatovic, Bouygues Télécom
Jim Chen, University of Minnesota
Andrzej Cieslik, Warsaw University
João Confraria, Universidade Católica Portuguesa, Lisboa
Isabelle Crocq, Francetelecom
Richard Curry, London Business School
Peter Druga, PD Consulting
Dieter Elixmann, WIK GmbH
Willis Emmons, Georgetown University
Stephen Farago, Australian Competition and Consumer Commission
Natascha Freund, Telekom Austria AG
Hidenori Fuke, Kansai University
Rajni Gupta, Univeristy of Toronto
Justus Haucap, Universität der Bundeswehr Hamburg
Kenta Hayashi, Osaka University
Momin Hayee, British Telecom
Anders Henten, Technical University of Denmark
Tim Kelly, ITU - International Telecommunication Union
Guenter Knieps, Albert-Ludwigs-Universität Freiburg i. Br
Djuro Kutlaca, Institut Mihajlo Pupin
Michael Latzer, ICE-Austrian Academy of Sciences
Gilles Le Blanc, Cerna, Ecole des Mines de Paris
Peter Lewisch, Cerha, Hempel & Spiegelfeld, Wien
Lurdes Martins, University of Minho - Campus de Gualtar
Georg Merdian, LambdaNet Communications GmbH
Bengt Mölleryd, EVLI Bank Abp, Stockholmsfilial
Banani Nandi, AT&T Shannon Laboratories
Tung Q. Nguyen-Khac, AOL Deutschland
Nicolae Oaca, Romtelecom S.A.
Elizabeth O'Callaghan, Australian Competition & Consumer Commission
Paul Phumpiu, OSIPTEL, Lima
Brigitte Preissl, DIW
Albon Robert, Australian Competition and Consumer Commission
Edward Roche, Columbia Institute for Tele-Information
Stefan Schmitz, ICE - Austrian Academy
Koji Shinjo, Kobe University
John Small, University of Auckland
Pablo Spiller, University of California Berkeley
Gerrit Tamm, Humboldt University of Berlin
Masatsugu Tsuji, Osaka University; OSIPP
Svein Ulset, NHH Bergen
Margit Vanberg, Zentrum für Europäische Wirtschaftsforschung GmbH
Pierre Vialle, Institut National des Télécommunications
Heleen de Vlaam, Delft University of Technology
Scott Wallsten, AEI-Brookings Joint Center
David Waterman, Indiana University
Bjorn Wellenius, The World Bank
Thorsten Wichmann, Berlecon
Johan Willner, Department of Economics and Statistiks Abo Akademi Univ
Glenn A Woroch, University of California
Julian Wright, University of Auckland
4.ABSTRACTS
CSI COUNTRY STUDIES I: CHAIR MR HENTEN
DISCUSSANT:MS PREISSL
CSI 1.1
INNOVATION AND COMPETITION:
AN ANALYSIS OF THE DANISH TELECOM MARKET
Authors: Morten Falch, Anders Henten ,Knud Erik Skouby, Reza Tadayoni
Technical University of Denmark
The paper analyses the innovation development in the Danish telecom sector. Three main
questions are examined:
 The relations between innovation and competition
 The general innovativeness in the Danish telecom market
 The role of policy and regulation in the innovation development
Innovation and competition
The paper discusses, on the one side, the implications of competition on innovation activities
and, on the other side, the implications of innovation on competition. The overall conclusion is
the liberalization and the introduction of competition has increased the innovation activity in
the telecom sector. Secondly, it is concluded that it cannot clearly be concluded whether it is
the incumbent operator or the newer operators, which are the most innovative. Furthermore,
the innovation activities of the operators in the present situation must be characterized as
service development, while more long-term research and development activities are located
with the equipment manufacturers.
The general innovativeness in the Danish telecom market
Denmark has traditionally been one of the countries with the highest diffusion of telecom
networks and services. In a period right after the early liberalization of the Danish telecom
market, this lead to a position as kind of test market for new products and services. Still,
Denmark is an advanced market for telecom networks and services, but it has lost its position
as a test market.
The role of policy and regulation
In the liberalized and market driven telecom sector, sector specific regulation and policy
initiatives still have an important role to play. This applies not only to the traditional price and
competition questions, but also to the more qualitative and pro-active questions regarding the
divisions of labor in the innovation activities in the sector.
In the paper these issue are analyzed and discussed. The paper is based on a report delivered to
the Danish NRA.
CSI 1.2
PUBLIC POLICY AND THE TELECOMMUNICATIONS EVOLUTION:
THE CASE OF GREECE
Authors: Theodore Apostolopoulos, George Kakouros, Xanthi Psiakki, Athens University of
Economics and Business, Greece
In this paper we present the evolution of telecommunications nation-wide, as a result of an
appropriate public policy, namely state intervention aiming at telecommunications services
improvement. In order to model the issue, a general approach is used based on a structured
methodology.
The methodology comprises a) definition of the public issue to be handled, (including
historical data, entities involved called “participants” and interactions among them),
b) alternative solutions c) selection of a solution based on specific criteria
d) implementation and finally e) assessment of the policy adopted. A graphical depiction is
used for the better comprehension of the problem in its definition phase, comprising a multilayer model where the problem’s participants are presented, positive or negative interactions
among them, their claims and their respective economy values. Based on the general approach,
the case of Greece is explored in detail focusing on specific parts of the general approach, that
is definition of the problem, implementation of the policy adopted and assessment since we are
at a time point where solutions are already decided, selected and implemented. Thus, particular
emphasis is put on the assessment, as at this time point, it is considered the most useful tool for
the planning of future strategies.
Given that state intervention is selected as the most
appropriate policy, we examine and assess the measures and projects undertaken by the state,
during the last years, aiming at the motivation of both the public and private sector towards
telecommunication advancement and liberalization regime. The paper’s structure follows
specific time periods with certain features. [1] Monopoly regime, development and
liberalization, regulation issues as well as the market’s reaction in the different time periods are
discussed, describing the main issues for each period pointing out the results of the state
intervention. To be more specific, the first phase (1930-1980) comprises the establishment of
the Greek Telecommunications Organization (OTE, 1949) and massive investment in network
infrastructure in order to provide telephone services. During the second phase (1980-1990)
OTE becomes part of the public sector but its performance is more and more deteriorating. The
third phase (1990-2002 and beyond) is characterized by improvement in network infrastructure
and slow shift towards liberalization. The third phase, as the focal point for this paper, is
further divided in three sub-periods. A) Beginning of the ‘90s, marked by the absence of
national policy on telecommunications and the establishment of two pilot research networks
operating at low speed. B) Mid ‘90s, characterized by the adoption of a first national plan on
the development of telecommunications in the country. It was implemented via specific
projects, mainly in the academic and research area, that are still operational (Academic and
Research Network Backbone, Academic Access Network, Education Access Network, MAN
ATM Pilot, National Information System, Public Administration National Network etc). [2] In
addition, the National Regulatory Authority (National Telecommunications and Post
Commission) was established aiming at liberalization enhancement. The market reacted slowly
to the new regime, among others it is worth mentioning the development in Internet Service
provision, the establishment of the ISPs Interconnection Point, named Athens Internet
Exchange (AIX) in 1997 and the initiation of the liberal regime in mobile telephony. Two
operators other then OTE shared the market with high penetration rates. Nevertheless, in
general terms, the evolution of telecommunications in Greece was lower than the EU average.
C) Year 2000 and beyond, where the successful projects of the previous period continued and
new policy elements appeared, namely regulation [3] aiming at liberalization and market
opening. EETT was activated and started numerous initiatives towards enhancement of
competition covering all aspects of telecommunication infrastructure and services (licensing,
numbering, universal service, wireless communications, leased lines, local loop unbundling,
interconnection electronic signature, UMTS, radio equipment and telecommunications terminal
equipment (R&TTE)). The response to EETT’s policy measures has been very optimistic.
(Until 10/2001, 92 General Licenses have been issued and 41 special licenses covering all
telecommunications technology areas mentioned above). [4]
OTE responded to the regulatory regime and competition by offering a variety of advanced
products and services which would cover the demands of its customers, both individuals and
companies, such as fixed telephony, ISDN, standard access, Internet, telecommunications cards
and mainly for companies tele-applications, fixed and mobile phones, Internet, ISDN,
Company Networks, promotional and specialized services.
Finally, the assessment of the public policy is presented based on specific indicators compared
to EU and OECD data. The results show that significant progress has been achieved in all
sectors of telecommunications during the last 5 years. Liberalization regime and regulatory
issues, although delayed, are successfully implemented. In addition, important steps towards a
real open competitive market have been made. Quantitative results are quite satisfactory: The
network infrastructure is seriously upgraded, fully digitalized with a choice of advanced
alternative technologies. The density/population ratio in voice telephony has significantly
increased; prices are reduced but are still higher than the average EU. Alternative operators
have appeared very recently. Mobile communications are the most competitive sector among
the Greek Telecommunications Services; mobile telephony penetration equals the EU average
while it has the highest increase rate in EU Internet penetration, although increased during the
last years with a rate double than the average EU, is still very low for household and business.
On the contrary, academic and research Internet penetration is very high reaching 100%. [5]
JEL Code/Keywords:
Keywords: telecommunications infrastructure and services, state intervention,
telecommunications deregulation
CSI 1.3
THE GREEK TELECOMS MARKET BEFORE AND AFTER LIBERALIZATION
Authors: Demetrius Yannelis, University of Piraeus, Greece
Helen Gaglia, Hellenic Telecoms Organization, Greece
The paper examines the state of the Greek telecoms market before and after the liberalization
of the fixed telephony that took place in January 1, 2001. Specifically, we will examine the
strategy that the Hellenic Telecommunications Organization followed before the liberalization
in order to face the upcoming competition. As with many incumbents facing competition, OTE
has chosen to expand its activities by investing in the fixed and mobile telephony in
neighboring telecoms operators in the Balkan area. At the same time, OTE tried to develop
very fast its domestic mobile services and get a large share of the domestic market, as its
mobile license was granted four years after the first two mobile licenses were granted to its
main competitors. Despite the great success of OTE with regard to the second goal, its first
goal to become a leading telecommunications provider in the Balkans does not seem to be very
successful, due to unforeseen international difficulties as well as domestic problems with its
main equipment supplier.
The paper also examines the market for mobile services and the strategy that the different
players have followed. We will draw particular attention on OTE’s subsidiary Cosmote and the
strategy that it followed, so as to become the provider with the largest market share in terms of
subscribers. Competition in the mobile market is rather tough now with prices falling
drastically. This was mainly due to the government’s will to award a third license to Cosmote
that broke the duopoly that existed for four years in the market for mobile services.
Two years after the liberalization of the fixed telephony, OTE still holds a very large market
share. This is mainly due to the slow process of signing interconnection agreements and the
high cost of local loop unbundling. It is only very recently that the National Regulatory
Authority has imposed prices for local loop unbundling after the failure of the incumbent to
provide cost oriented tariffs for the local loop. Another obstacle that entrants in the fixed
telephony face is the very high cost of termination charges on mobile networks that are set and
controlled by OTE and mobile carriers with significant market power.
The denial of the incumbent to offer wholesale prices for leased lines, the late introduction of
carrier pre-selection and the expected introduction of number portability are also some of the
factors that impede the development of competition in the fixed telephony.
The paper examines the role that the NRA has played before and after the liberalization of the
market. Although its actions show to a large extent regulatory capture before the market
liberalization, its independence has been strengthened after liberalization improving its
regulatory functions by taking effective interim measures.
JEL Code/Keywords:
JEL Codes L11, L96, L51, L41
Keywords Liberalization, Regulation, Unbundling, Fixed Telephony, Mobile Telephony
Armstrong, M., Cowan, S. and Vickers, J. (1994), Regulatory Reform: Economic Analysis and British Experience.
Cambridge: MIT Press.
Kiessling, T. and BlondeelY. (1998), “The EU regulatory framework in Telecommunications”,
Telecommunications Policy, 22 (7), pp.571-592.
Laffont, J.-J. and Tirole, J. (1993), A Theory of Incentives in Procurement and Regulation. Cambridge: MIT Press.
Melody, W. (1997), “On the Meaning and Importance of Independence in Telecom Reform”, Telecommunications
Policy, 21 (3), pp. 195-199.
The Single Market Review (1997), “Telecommunications: Liberalized Services”, Office of Official Publications
of the European Communities and Kogan Page Publishers.
Xavier, P. (1997), “Price Setting and Regulation for Telecommunications in the Absence of Reliable and Detailed
Cost Information”, Telecommunications Policy, 21 (3), pp. 213-233.
CSI 1.4
LIBERALIZATION?! WHAT LIBERALIZATION?
Author: Dr. Nicolae Oaca, Rom Telekom, Romania
World Context
Telecommunications crisis was triggered by very optimistic forecasts on demand for fixed and
mobile telephony. Some years ago, optimistic forecasts on transport capacity triggered the
establishment of many carriers, while today many of them have filled for bankruptcy. Three
years ago, very optimistic forecasts on ARPU of UMTS services triggered a fight for UMTS
license in UK, Germany, etc., while today there are big problems: technological, financial (DT
or FT have some US$60bn debts), etc.
Central and Eastern Europe
In last few years fixed telephony in C&E E is in stagnation: penetration rate in Hungary or
Czech Republic established to some 37%, while for Western Europe penetration is still
increasing. Could be 37% or 40% maximum penetration C&E E countries could afford? If yes,
which is the value Romania, a country having GDP three time less, could afford? Incumbents’
competitors seems to face problems – Poland Elektrim. In the same time mobile telephony is
increasing rapidly, mobile penetration being higher than fixed.
Romanian telecommunications
Romanian telecommunications have developed at a slower pace mainly because of monopoly
and state ownership, unable to manage and to finance a sector with a high growth rate. Where
competition was permitted results were outstanding.
Fixed telephony
Telecommunications infrastructure has developed at slower pace, largely due to the fact that in
the past RomTelecom, national telecommunications operator, collected insufficient revenues
to maintain the system properly. This was because of incoherent tariffs, far lower than
necessary to recover the cost of an efficient system. On December 30th 1998, OTE of Greece
paid US$675m for a 35% stake and 16% voting rights, becoming RomTelecom’s strategic
partner. In early 2003 a new stake in Romtelecom was sold to OTE, which now is a majority
shareholder – 54%.
Mobile telephony
The launch of GSM mobile operators (MobiFon and Mobil Rom) in 1997 has created a strong
competitive environment with outstanding results some 5.2 million mobile subscribers by the
end of March 2003, while the growth rate in mobile subscribers, seems to be among the highest
in Europe. Late in 2001 a new mobile service Zapp Mobile, based on CDMA450 was
launched, providing voice and data at 154Kb/s and challenging the existing GPRS services or
future UMTS services.
Preparing for liberalization
An independent regulatory body – ANRC - was established in September 2002, which started
immediately to elaborate on the legislation for liberalized market. Today Romania seems to be
one of the most advanced countries in Europe to use EU recommendations.
Liberalization
Liberalization landscape shows many small players (mainly ISPs) competing in the most
lucrative market – international – to provide much cheaper VoIP services, while markets
requiring higher investments (local mainly) show a desolated landscape.
Liberalization, wrong time?
In last 13 years, Romanian fixed telephony was positioned as a social service, while sector
reform was postponed. Add higher investments (more than 600US$/line) in fixed telephony
compared with mobile telephony (~300US$/line), and lower tariffs, making fixed telephony
less attractive. Why to invest in a fixed telephony network? In Central Europe liberalization of
a shrinking industry coincides with the world telecommunications crisis, and mainly with the
beginning of fixed-line crisis in region. So, what is impact of market liberalization for a
country like Romania?
What to do?
How to fill the existing gap between fixed and mobile telephony? Eliminating tariffs limits?
Increasing fixed telephony tariffs, which for time being are lower than for mobile telephony.
Or, should states fill this gap, via subsidies, or other incentives if really wand to boost an
industry with problems?
JEL Code/Keywords:
Keywords: alternative infrastructures, liberalization, C&E European and Romanian telecomm.
PAPERS NOT TO BE PRESENTED:
NATIONAL INNOVATION SYSTEM (NIS) OF MONGOLIA: INTEGRATED NETWORK OF
INFORMATION TECHNOLOGY (INIT) IN MONGOLIA
Author: Kwan Young Kim, Ulaanbaatar University, Mongolia
Mongolia stands high in public estimation by Information and Communications Technology
(ICT) and transformation. However, Mongolia depends upon a telephone line through modem
to connect the Internet. However, Mongolia shows an ironical phenomenon that people who
are compatible for more than fifty percent of Mongolian population use mobile phones. In spite
of the poor surroundings in Information and Telecommunications, the Mongolian compatibility
for Information and Telecommunications is defined as much better than any other developing
nation.
Government of Mongolia proclaimed the importance of ICT that would be major accelerator
for the development of Mongolia in the twenty-first century with the reformation of
management and economy.
How should the concept lead Mongolia to advanced level of ICT-oriented nation?
It is necessary to provide favorable conditions for the development of Government-Legislation
Framework (GLF), Business-Economic Framework (BEF), and Civil-Society Framework
(CSF) that require establishment of state policy and regulatory regimes. Every framework has
to have its own strategic plan of action. Government-Legislation Framework (GLF) should
take the chance to promote a favorable legal environment of ICT with setup of policy
coordination and regulatory system. Eventually Government Information Systems (GIS) is
acquired to develop and enhance the GLF. What Business-Economic Framework (BEF)
brought about is to expand ICT business and make it a highly efficient economic sector. Also,
it is expected to establish “Efficient Operative Information Systems (EOIS) for business and its
economy”. Civil-Society Framework (CSF) has to provide opportunities for active and equal
participation of citizens in social relations by using ICT. It is absolutely required to establish
Civil Information System (CIS) accessible to every citizen that would implement ICT in social
services.
The concept of ICT Development in Mongolia will help achieve the development of a
knowledge-based society and get the improvement of quality of people’s lives. That is called to
“National Innovation System (NIS)” of Mongolia. To achieve the goal of the GLF, the
government has to build a well-informed social structure and the main provider of open
information resources. To create a business environment capable of ensuring efficient
integration into the world economy, the BEF should enhance domestic intellectual potentials
and improve the competitiveness of national products. To create a favorable environment for
Mongolian citizens to communicate freely among themselves with the world community, the
CSF is to ensure opportunities for their equal and active participation in social life and improve
quality of people’s lives.
The establishment of the advanced and efficient NIS is able to implement through empirical
analyses such as Delphi Analysis and Question Analysis.
Eventually, NIS will bear fruit such as advanced NIS of Mongolia that will achieve by
integrating the three frameworks. That is to be called to “Integrated Network of Information
Technology (INIT) in Mongolia” that would finally stand for Mongolia toward other nations in
terms of ICT. Therefore, people who are concerned with Mongolia’s ICT organization such as
enterprises, NGOs, International Organizations, the Government of Mongolia are obliged to
get the chance to contact with the INIT system.
RTS: RESTRUCTURING THE TELECOM SECTOR CHAIR: MR WHALLEY
RTS1.1
GIANTS AND DWARFS – UNDERSTANDING SCALE WITHIN THE EUROPEAN MOBILE
COMMUNICATIONS MARKET
Authors: Jason Whalley, Peter Curwen, Strathclyde Business School, UK
It is often stated that telecommunications is a global industry, with companies spanning
the globe as they provide telecommunications services in many different national markets.
Such companies seek to judge themselves not against their national peers but against a select
handful of similar minded global telecommunications companies.
However, the
internationalisation of the telecommunications industry has not been as complete as we have
been led to believe and many of the globally minded players have seen their strategies come
unstuck in recent years. Moreover, even if the geographical scale is reduced to a region such
as Western Europe or South-East Asia few of the leading telecommunications companies can
claim to have a true regional presence.
This paper will explore the notion of scale within the European mobile communications
industry. In doing so it will present data that demonstrates the widely divergent scale of
multiple 2G and 3G licence holders across 39 countries. The paper presents for the first time
in the public domain detailed data that describes which mobile communication companies
owns what licence. We will highlight the gap in scale between Orange and Vodafone on the
one hand and all of the other multiple licences holders on the other hand. The paper will
illustrate that the smaller multiple owners of licences are not homogenous, and that they can be
differentiated in several ways. One way in which they can be differentiated is the degree to
which they are present in the largest five European markets (Spain, Italy, UK, France and
Germany) whilst a second is the extent to which they have constructed regional presences for
themselves. A third differentiating characteristics is the mode of entry into mobile
communication markets.
RTS 1.2
QUALITY IMPROVING PORTFOLIO EFFECTS IN EUROPEAN UNION
COMPETITION POLICY
Authors: Mark A. Jamison, Clifford A. Jones, University of Florida, USA
The European Union Competition Commission (Commission) has applied the concept
of portfolio effects in recent merger cases. There is some disagreement over the precise
meaning of the term portfolio effects, but in general it means that a firm has a portfolio of
products that rivals have difficulty matching and the portfolio is a source of competitive
advantage. The Commission applied this concept in denying the proposed GE/Honeywell
merger,1 a merger that the U.S. and Canada had already approved. The Commission’s decision
stimulated considerable debate about the Commission’s reasons for denying the merger and
renewed debate about why competition authorities from different countries might disagree on
mergers. (See, for example, Patterson and Shapiro, 2001; Schmitz, 2002; Monti, 2001; and
James, 2001.) One of the Commission’s concerns in the GE/Honeywell case was that the
combination of GE Capital with certain other products would allow the merged company to
develop product innovations that rivals could not match. For example, the Commission
concluded that the combination of GE Capital and the merged company’s aircraft engine
business would allow the merged company “to take more risk in product development
programmes than any of its competitors.” (¶ 108)
Issues of product quality and product features have also taken center stage in
Commission decisions and proceedings involving network industries. In the WorldCom/MCI
merger, the Commission required the merging companies to divest significant portions of their
Internet backbone assets based in part on the concern that the merged company would have the
ability and incentive to degrade quality for interconnection with rivals. The Commission
denied the proposed WorldCom/Sprint merger based on similar concerns. The Commission
has considered and is considering complaints against Microsoft that are based in part on
concerns about the quality of the interface between Microsoft’s software packages versus the
quality of interface between Microsoft’s software and rivals’ software.
The effects of market structure on firms’ incentives to degrade the quality of interfaces
between networks have been analyzed in the economics literature (see, for example, Crmer et
al., 2000). Missing from this literature is an examination of the effects of market structure on
overall product quality, including the quality of interfaces between products.
In this paper, we analyze the effects of market structure on product quality and how
competition authorities in different countries may disagree on mergers and antitrust actions in
network industries. We develop our results by considering a model in which a country can
approve or deny a proposed merger that could increase the product quality of one firm, which
we call a, relative to the product of its rival, which we call b. The firms’ products are rival
networks and the firms may interconnect their networks. By an improvement in quality, we
mean that there could some change in a’s product such that the demand for a’s product would
increase relative to the demand for b’s product.
We assume that customers have innate preferences between firms. We accomplish this
by assuming that customers are uniformly distributed along a line segment and a customer’s
location on the line segment represents her product preferences. a and b are also located on
this line, but not in the same location. All other things being equal, a customer located closer
to a than to b prefers a’s product to b’s product. After a country has made its decision on
whether to approve or deny the proposed merger, firms decide whether to stay in the market or
exit. Each firm that stays in the market chooses network quality, including the quality of its
interface with rival networks, and a single uniform price to maximize its own profit. After
firms choose quality and prices, customers perfectly observe the prices and product quality.
1
General Electric/Honeywell, Commission Decision, Case COMP/M. 2230, July 3, 2001.
Each customer who chooses to purchase buys from the firm that offers her the greatest net
consumer surplus.
We examine both a single-country situation, in which both firms are from the same country
and all customers are in this country, and a two-country situation. We develop conditions
under which the merger would improve a’s product quality, including conditions that would
cause b to exit the market because producing would result in negative profits for b. We also
develop conditions under which the two countries would disagree on whether to approve or
deny the merger. Our model is theoretical, so we illustrate the results with simulations.
JEL Code/Keywords
JEL classification L40, L 11, L50
RTS 1.3
A NEW SYSTEMIC RISK IN THE INDUSTRY? SOME NEW QUESTIONS
Author: Jean Paul Simon, International Regulatory Strategy, France Telecom, France
RTS 1.4
PRIVATIZATION AND ECONOMIC GROWTH: EVIDENCE FROM MENA COUNTRIES
Author: Anastassios Gentzoglanis, University of Sherbrooke, Canada
Inadequate levels of investment in the telecommunications industry in MENA countries
resulted in a network unable to meet demand, with poor service quality, limited choice of
services, low productivity and inappropriate tariff structure. There is a strong need to speed up
the privatization and liberalization of telecommunications in Arab countries to attract
investments in the provision of universal service and the development of information and
communication technologies. This approach to promoting investment in infrastructure is
gaining popularity worldwide. Nevertheless, it is not clear at all, neither theoretically nor
empirically whether privatization and entry lead to an increase in investment in infrastructure
and in social welfare. Using a theoretical model, I examine the incumbent’s and the entrant’s
strategies in terms of investment in an open regulatory framework. The theoretical results are
ambiguous. Using recent data from MENA countries, I examine the investment behavior and
overall performance of the telecommunications firms that have experienced some form of entry
and privatization. Preliminary results show that privatization and entry do increase investment
in the sample countries examined.
JEL Code/Keywords:
Keywords: privatization, investment, MENA countries, technological change, mobile
telecommunications.
S1: STANDARDIZATION: CHAIR: MR WEGBERG
S1.1
THE GRAND COALITION VERSUS COMPETING COALITIONS: TRADE-OFFS IN HOW TO
STANDARDIZE
Author: Marc van Wegberg, University of Maastricht, NL
The standardization landscape in the Information and Communication technology industries is
highly fragmented. Standardization tends to involve many different standardization bodies,
industry consortia, and alliances. Some of the coalitions involved cooperate with each other,
while others compete. The existence of competing standardization coalitions may prevent
coordination on a common standard. There is a lot of debate among practitioners and analysts
about whether this fragmentation creates a coordination failure. This paper takes a middle
ground in this debate. Competition between standardization coalitions may indeed harm
compatibility, but it also helps to mitigate coordination failures within standardization bodies
and coalitions that occur due to negotiation in committees. A notable coordination failure is
sluggishness in setting a standard, due to delaying tactics by delegates in a committee.
Introducing competition between coalitions can speed up negotiations within them, and thus
help to overcome this intra-committee coordination failure. A game theoretic model explores
the effect of competition between coalitions on the speed of decision making and
standardization.
JEL Code/Keywords:
JEL Codes D7, L2
Keywords coalition competition; standardization
S1.2
THE ROLE OF INTEROPERABILITY IN THE DEVELOPMENT OF MOBILE INTERNET IN EUROPE
Authors: SergioRamos, Claudio Feijoo, Jorge Pérez, Luis Castejón, Universidad Politecnica de
Madrid, Spain
In the last few years, the telecommunications industry has witnessed two of the biggest
phenomena in its recent history – the Internet and mobile telephony – which have contributed
decisively to making it one of the principal sectors of the world economy.
In the past, mobile telephony achieved its greatest success in Europe, where the combination
of, among other factors, a common standard (GSM) and a non-intrusive regulatory framework
that gave operators considerable freedom contributed to successful market development.
Consequently, mobile telephony services become very popular in Europe within a short space
of time, attaining a very high penetration rate.
Nevertheless, the privileged situation of mobile telephony in Europe is not matched by the
development of the Internet, where the US leads the field worldwide. Low Internet penetration
is one of the reasons behind the bulk of efforts by Europe’s governments and the industry to
move forward to the next generation of mobile telephony. Demand for new mobile services
based on convergence between the Internet and mobile communications, plus the EU’s interest
in capitalising on the competitive advantage over the US in order to make progress in the
deployment of the Information Society, have stimulated the development of new thirdgeneration (3G) mobile systems in Europe.
As a result, European operators began a race to develop the new generation of mobile systems,
with the novelty of offering broadband access to Internet content, services and applications.
However, it was not to be: progress towards 3G has been fraught with obstacles that have
prevented its implementation in Europe to date.
This momentary failure can be attributed to the regulatory model applied, based on creating a
single pan-European market in network infrastructure and handsets which would guarantee
standardisation and certification of equipment, thereby generating major scale economies.
Until Vodafone’s arrival as the first pan-European operator, services were traditionally
provided by domestic operators in their respective countries. Although there was not a single
market, users could use their handsets throughout Europe since continuity of service was
assured by roaming agreements between operators.
Moreover, the fact that spectrum is a scarce resource that must be regulated and controlled
made it necessary to limit the number of operators, which led to a peculiar scheme of
introducing new players by technological cycle or generation, and requiring them to roll out
their own communications networks. This model led to domestic oligopolies where the
provision of end services was solely in the hands of the phone companies, which had a
vertically-integrated value chain.
With this model, regulators sought to reward the risk assumed by players through their major
investments in the sector and to ensure that, for the first time, networks would be built in a
competitive market situation. The combination would enable players to earn a rapid return on
investment, thereby assuring not only the viability of the model but also continued investment
in the development of new generations of mobile systems and the installation of the related
infrastructure.
These were the arguments used when designing the transition to 3G, which in Europe involved
the adoption of a new standard: UMTS. At the same time, the WAP open standard was boosted
for the development of new mobile Internet services, the intention being to transfer the
philosophy underlying the Internet and TCP/IP to mobile telephony. This strategy of continuity
appeared to be sufficient to assure further success and it generated great expectations about this
technology of the future, which unfortunately failed to materialise.
Firstly, the technology fever had a very negative impact on the sector, since the business plans
designed by the operators in conjunction with equipment manufacturers did not fully gauge the
risks and efforts involved in migrating to 3G. Consequently, operators bid enormous sums for
mobile licenses in Europe, generating a windfall for governments. The bursting of the tech
bubble and the subsequent economic crisis undermined confidence in the sector, which proved
unable to bring the new services to market.
Moreover, recent years have seen fierce competition between different access technologies
(ADSL, cable, LMDS, PLC, UMTS, etc.), which has created even more uncertainty by
diversifying R&D expenditure in the midst of a major crisis. This competition has been
detrimental to the mobile industry, since cutbacks in investment have delayed the development
of 3G.
Finally, and most importantly, the European model has been totally distorted due to the
inability to develop UMTS on schedule and to adapt GSM to the new mobile Internet paradigm
sufficiently in advance. The last few years have shown that the new market in mobile data
services requires that the value chain be opened to new players, mainly the software industry,
which can stimulate the creation of an offering of services that is attractive to users. At the
same time, there is a perceived need to attain more compatibility, above and beyond the
telecommunications network, so as to enable the development of new services that are
conceptually similar to the Internet.
The question now is how to adapt Europe’s traditional operator-centred model to the Internet
paradigm, which is centred on the software industry? Interoperability has recently been
proposed as a key factor (though not the only one) that can facilitate the development,
deployment and marketing of advanced data services accessible to mobile users.
The EU considers that 3G is one of the vehicles that will provide citizens with access to the
Information Society in the coming years. In this connection, the use of open interoperable
platforms theoretically guarantees that users have freedom of choice in accessing new mobile
Internet content, services and applications while also fostering their rapid development.
However, this preliminary analysis by the EU fails to respond to such questions as: What are
the risks of interoperability? How will it affect the European industry? What strategies are the
various players applying? What role will governments play? This article will try to shed light
on some of them.
References
Colegio Oficial de Ingenieros de Telecomunicación (2002): The Potential of Technological
Convergence in the Development of the Information Society. Thoughts for Discussion. Informal
Meeting of EU Ministers for Telecommunications and the Information Society. Vitoria, 22-23
February 2002. Spanish Presidency of the EU.
European Commission (2002). COM(2002) 695 final: Eighth Report from the Commission on
the Implementation of the Telecommunications Regulatory Package European Telecoms
Regulation and Markets 2002.
European Commission (2002): Public Consultation and Public Hearing on a Report on
Remaining Barriers to the Achievement of Widespread Access to New Services and
Applications of the Information Society through Open Platforms in Digital Television and 3G
Mobile Communications.
European Commission (2002). COM(2002) 301 final: Towards the Full Roll-Out of Third
Generation Mobile Communications.
European Commission (2001). COM(2001)141 final: Introduction to Third Generation Mobile
Communications in the European Union: current situation and future prospects.
Foro de las Telecomunicaciones (2002): Horizonte de las Telecomunicaciones Españolas.
Colegio Oficial de Ingenieros de Telecomunicación.
Gretel 2002 (2002): Nuevo Diseño Europeo de las Telecomunicaciones, el Audiovisual e
Internet. Colegio Oficial de Ingenieros de Telecomunicación
Ramos, S., Feijóo, C., Pérez, J. & Castejón, L. (2002): Mobile Internet Evolution Models.
Implications on European Mobile Operators. The Journal of the Institution of British
Telecommunications Engineers. Volume 1. Part 2. July-September 2002.
Ramos, S., Feijóo, C., Pérez, J. & Castejón, L. (2001): Implications of the i-mode Business
Model on the Framework for European 3G Mobile Communications. International
Telecommunications Society, 12th European Regional Conference.
Srivastava, L. (2001): 3G Mobile Policy: the case of Japan. Info, number 6 volume 3, 459-484
JEL Code/Keywords:
Keywords mobile communications, mobile internet, interoperability, regulation, public
S1.3
A STUDY ON THE DEVELOPMENT OF INFORMATION AND COMMUNICATION
STANDARDIZATION INDEX MEASUREMENT MODEL
Authors: Seung-Hwan Lee, Myeong-Cheol Park, Sang-Woo Lee,
Information and Communication University, Korea
Kyoung-Cheol Koo, Telecommunication and Technology Association, (TTA), Korea
The standard issue in the information and telecommunication industry is increasingly
important with the rapid development of technology. This paper proposes an index model
which can measure the degree of standardization in the Korean information and
telecommunication field. We first classified ICT sector into 14 sub-sectors. Then for each subsector, we considered a set of important determinants to measure the level of standardization,
and constructed a linear equation using this set of determinants. Finally we estimated the
relative degree of importance of each determinant using the AHP methodology. The proposed
model found that overall level of standardization in the Korean ICT industry is relatively low,
and “IMT-2000 technology” and “computer network technology” among 14 sub-sectors are
highly standardized sub-sectors. Finally, the validity of the proposed model was also partially
proved using two different methods, holistic and historical approach.
Key words : Standardization, AHP, Information and communication, Index model
CNI CONTENT AND NETWORK I: CHAIR MR.HENG
CNI 1.1
US Cable Industry: Technological Developments and Regulatory Setting Causing a Shift
in Focus from Content to Telecom Services?
Author: Claudia Loebbecke, University of Cologne, Germany
Olli Rehn,University of Helsinki, Finland
The US Cable Industry - Market and Technological Infrastructure
More than 95% of total households in the US are passed by a cable system. Almost 75% of
these households subscribe to cable.
By 2002, the US cable industry had consolidated to the point that five main players, so called
'multiple system operators' (MSOs) - dominated the market, serving about 80% of the
industry's customers. One of the latest concentration activities was in November 2002, when
Comcast - at that time number '3' in the market - acquired AT&T Broadband, then number '1'.
Most cable operators use a so-called 'Hybrid Fiber / Coax' (HFC) architecture. They apply fiber
optic transmission technology to replace upstream coaxial trunk and feeder lines while,
downstream, the incumbent / existing coaxial feeder and drop lines were kept intact. Thus, by
replacing coax with fiber optic lines upstream, MSOs had improved signal reliability and
picture quality.
The HFC architecture also permits MSOs to install modules that activate a reverse path,
allowing customers to send data or voice signals from their home to the head-end. Such a
reverse paths, for example, allows users to push the 'Buy' button in the context of pay-per-view
applications.
Furthermore, this new architecture allows a significant increase in channel capacity and thus
offers high-speed Internet access (through cable modems) or cable delivered telephone service.
Finally, back in 2001, cable operators began to replace analogue set-top converters with digital
home communication terminals, which employed compression technology to significantly
increase channel capacity.
The combination of fiber optics, amplifier upgrades, and compression technologies laid the
foundation for cable operators to offer 'video-on-demand' (VOD) and a further variety of
interactive multimedia services. As of 2002, some MSOs have moved VOD beyond technical
trials and offer it as a commercial product in selected markets.
Competitive Situation in the Field of Video Content Services - Position of
Incumbents
In spite of such technological improvements, MSOs increasingly face competition from
satellite operators in the market to provide video content services. In 2002, almost 25% of US
subscribers obtained video content services from some company other than their local cable
operator. Direct Broadcast Satellite (DBS) accounted for more than 19 million customers by
the end of 2002. The few satellite players are big. DirecTV has more subscribers than all but
two cable operators, and the number '2' in the DBS market, EchoStar, has more customers than
all but three MSOs.
Competition also arose from facilities-based broadband companies such as Knology or
WideOpenWest. Finally, competition has emerged from telecom operators such as Quest
which delivers video content in the metropolitan Phoenix area based on VDSL technology.
Being challenged by other players and other technologies in their traditional field of video
content provision, cable operators have responded by offering telecom services, especially
high-speed Internet access.
Provision of High Speed Internet Access - Position of First Movers
Broadband competition goes beyond the provision of video content services. Cable operators
took early leadership in developing the market for high-speed Internet access. Soon after, a
profusion of competitive offerings from various telecom players began to emerge.
Notably, the deployment of cable modem services triggered a nation wide roll-out of Digital
Subscriber Line (DSL) offerings. The four major incumbent local exchange carriers (ILECs),
BellSouth, Qwest, SBC Communications and Verizon, offer DSL and accounted for more than
5 million customers at the end of 2002, 3rd Quarter.
The regulatory environment, particularly two decisions taken by the US Congress, also
influenced the competitive situation. In 1992, the US Congress required that vertically
integrated MSOs, such as AOL Time Warner, make their programming services available to
competitors at fair terms. The 1996 Telecommunications Act kept this requirement but
otherwise more or less deregulated the cable industry. It was said that cable regulation would
expire in 1999 and most barriers for telecommunication and cable companies to enter each
others markets were removed.
Nevertheless, by 2002, most ILECs had reduced their originally ambitious plans to enter into
competition with cable companies by 'overbuilding' cable operators' networks with their own
HFC infrastructures. The lack of enthusiasm can easily be explained by some economic
insights.
(1)
Compared to the cable operators' networks, ILECs face a cost disadvantage in
building HFCs from scratch. ILECs mostly lacked coaxial cables for the last mile
between their fiber nodes and customers' homes. Their existing twisted copper lines
were designed to carry narrowband voice transmissions but were not sufficient for
transmitting video signals.
(2)
ILECs (as well as cable operators) could not escape the fact that increasing
competition between both groups would lead to unwanted price cuts to end users
paired with increasing programming and marketing costs.
(3)
The 1996 Telecommunications Act had granted Regional Bell Operating
Companies (RBOCs) permission to offer long distance services, as soon as they
fulfilled the requirement imposed on them to cooperate with competitive local
exchange carriers wishing to leverage ROBCs' facilities. In spite of declining long
distance prices, decent gross margins still tempted ILECs to enter the long distance
market before tackling the seemingly risky and obviously expensive video market.
Summary and Outlook
Satellite service subscription growth rates, market entrance of other multi-channel video
providers as well as MSOs' own technological innovations (digital, high storage, intelligent settop boxes) have put high pressure on MOSs' traditional business lines.
At the same time, MSOs have more than successfully entered the market of high-speed Internet
access. Cable operators' high speed cable modems account for almost 65% of all US
customers. It seems that the combination of technology, timing of market entry and regulatory
environment (persisting constraints on ILECs with string impact on their cost structures) let the
Internet access market tip to MSOs.
Customers are increasingly indifferent to who is offering them which application or service and
which infrastructure the provider uses. This has led to significant shifts in the markets of
traditional telecom as well as video content services.
It has been hypothesized that the shifting focus from content to telecom services in the US
cable industry is influenced by technological developments and the regulatory setting.
Although the European situation is on some counts quite different, for example broadband
service delivery is still dominated by DSL providers as opposed to cable or satellite operators
in most European countries, the authors propose to extend their research to examine the recent
developments in the European telecom market(s) in the context of broadband convergence..
CNI 1.2
VIDEO CONTENT SERVICES AS A TRANSFORMING INDUSTRY
Authors: Claudia Loebbecke, Michael Staudinger, University of Cologne, Germany,
Ian MacInnes, Harvard University, USA
Introduction
The purpose of this paper is to show how video content services are transforming as a result of
the introduction of new technologies. Video content service providers include cable
distributors (e.g. ComCast), television broadcasters (e.g. ABC), cable channels (e.g. CNN),
satellite companies (e.g. DirectTV), and Internet services including news websites (e.g.
real.com; cbc.ca). In general the content is prepared for consumption by many potential
viewers and is unidirectional. Thus the definition does not include videoconferencing services.
Manufacturers of equipment such as set-top boxes serve and influence the industry. There are
several factors that could possibly lead to revolutionary change in the video content service
industry as outlined above.
In our ongoing research, we are interested in future industry realignment with a focus on issues
such as 'concentration versus specialization', 'proprietary or open standards applications and
equipment devices and their impact on competitiveness', and 'actual rent-(profit-)based power
shifts among players and along the overall industry's value chain'. We have started by
investigating the situation in the United States, and later will investigate how and to what
degree our US findings can be transferred to selected European markets.
Background
In the United States, the cable distribution industry, which provides content from many
broadcasters and cable channels via coaxial cable, has traditionally been organized with
regional operators as exclusive providers. Terrestrial broadcasters also had regional franchises
but faced greater regulation in the areas of content and spectrum obligations. Because these
industries used dissimilar technologies and were subject to different types of regulation, they
evolved independently from each other. Satellite providers of video content services entered
the market and, given the high costs associated with establishing a satellite network, there have
been only a few providers in the United States, including DirecTV and EchoStar. In contrast to
cable and broadcasters, satellite companies have been able to serve an entire continent with a
single signal. Entry by satellite providers resulted in greater competitive pressure for cable
distributors.
Industry Value Propositions: Drivers of change
The paper examines driving factors that have implications for the industry value chain for
video content services including

digitalization,


increase in broadband connectivity to the home - combined with
increased processing power for network servers, and
personal video recorders (PVRs) - including intelligent set-top boxes
with cheaper storage and faster processing.
Digitalization of all sorts of content has facilitated the process of Internet-based distribution,
and thus also increased the product spectrum. As a source of entertainment, the Internet
indirectly competes with television-based video programming.
The increase in broadband connectivity to the home introduces new products such as always
on Internet access and thus competition. Several video content providers could offer programs
for download or live streaming. Such Internet-based television programs could easily reach
viewers in other countries. This, however, raises rights issues, which have not been settled yet.
Hollywood movie studios, for example, will want to separate the licenses they sell for
traditional video distribution from potential new licenses for Internet distribution. As well, the
number of substitutes for traditional video programming is increasing as individuals can
distribute home videos and companies can offer product demonstrations on demand.
Similarly, the incorporation of personal video recorder (PVR) features into set-top boxes is
likely to have a strong impact on video content service provision. While digitalization and
broadband connectivity have enabled distribution across traditional geographical and political
barriers, PVRs reduce the need for temporal coordination between programmers and viewers.
PVRs help users choose and organize the programming that they would like to watch at the
times they want to watch them. They act as a personalized agent that automatically finds
programming of interest to them. Users do not need to know the time or day when the program
is broadcast. Users are also able to avoid advertising if they choose. These capabilities,
together with the potential demise of prime-time scheduling, will have an impact on the
broadcasting and advertising industries. Programming, for example, may become more
specialized and the audience more fragmented. Revenue models would have to be adjusted.
Although PVRs have not yet had great commercial success, this can be attributed mainly to
high prices and the difficulty of communicating product features and functionalities. These
problems should decline as some cable companies (e.g. Time Warner Cable) put their weight
behind the distribution of intelligent set-top boxes that incorporate PVR features. To further
increase complexity concerning the industry value chain, users may also be able to connect
their PVRs over the Internet and share programming and other types of content within and
between homes.
Overall, the US video content services industry is facing a crucial stage of development that
coincides with the review of ownership restrictions for media companies by the Federal
Communications Commission. Regulatory issues thus will continue to play a substantial role in
the industry's future.
Outlook
Observing the way the video content service industry is evolving has shed light on the specific
drivers that could lead to competitive advantage. Obviously, the incorporation of new features
depends on the value that these can provide to customers who are not necessarily end users.
The primary customers for set-top boxes, for example, are the cable distributors and these are
not going to want features incorporated that may reduce overall profits even if they add value
for end users. For example, their desire to promote PVR features will depend on their ability to
find a viable business model to tackle competition from other providers such as the satellite
players and / or to more than offset revenue losses in other initiatives such as video-on-demand
from proprietary servers. Additionally, widespread use of PVRs capable of skipping TV
advertising would lead to reduced revenues for cable channels, thus indirectly affecting the
revenue models of cable distributors promoting PVRs. Considering our first insights to be
investigated further, we see different developments in different parts of the industry.
Concentration is rising drastically among cable operators and also among their set-top box
providers. We currently observe a push for proprietary standards among set top box providers
(and thus cable operators), but expect increasing use of open technologies for a variety of
standardization areas. Finally, our analysis so far suggests an additional power shift from
content providers to content distributors. Among the distributors, satellite - although still small
in user numbers and budgets - could carry strong economic arguments. We are still
investigating the likelihood and the likely timing of a potential market power shift from cable
to satellite. Increasing use of new technologies such as PVRs and Internet based distribution
seems to put the current business model of cable channels at the highest risk.
CN I 1.3
THE MUSIC INDUSTRY IN AN EVOLUTIONARY CHANGE:
HOW NEW TECHNOLOGIES CAN TURN AN INDUSTRY UPSIDE DOWN
Author: Tung Q. Nguyen-Khac, AOL Germany
Introduction
During the last decade, the fast-paced technological development of the IT industry in regard to
transmission possibilities of digital information has exerted a massive influence on all media
industries. There are two aspects that have mainly contributed to the redevelopment of
particular fields in the media economy or that will make them redefine themselves. Most
notably, the increasing penetration of the internet, which has reached more than 50 percent of
the relevant population groups in highly developed countries, but also the sharp drop in prices
for highly advanced hard- and software in the consumer market need to be mentioned. Apart
from some segments of the publishing industry, the music industry has been largely affected
for more than three years now. The music industry’s position and connected strategic
challenges are the subject of the following examination of the authors.
Goals, Proceeding and Scope Of This Study
It is the authors’ goal to give a short and practice-oriented, yet comprehensive overview over
the historical development and structure of the music industry. This encompasses the
description of the recent status quo of the music economy, as well as the analysis of potential
scenarios which could arise due to recent developments on the technology side. Technological
progress is increasingly questioning existing structures and processes of the music industry.
Taking a look at the industry’s value chain, especially production, marketing, rights
management and content distribution are areas where significant changes can be expected. A
related question is to what extent a sustainable business model can be established within the
music industry.
The music business is influenced by a number of different disciplines and areas. That is why
the authors chose the constellation analysis. This is more or less an interdisciplinary approach:
by analysing influence factors from diverse fields, such as IT, economy, law and politics. Even
though this article has an interdisciplinary approach, it focuses more on economic aspects. For
this reason and due to the limited extent as well as the high complexity of particular areas legal
(e.g. copyright and digital rights management) and technological aspects will be touched
lightly but cannot be dealt with in great detail.
Is The Music Industry In A Dilemma? A Quick Look At Recent Figures
Just a glimpse at recent figures illustrates the current dilemma of the music industry and thus
which challenges it is facing. The International Federation of the Phonographic Industry
estimates that about one billion illegal CD-copies were circulating in 2002. Comparing this
figure with 2.3 billion officially sold CD albums, it is understandable that the music industry is
in a rather bad mood. Germany too, meanwhile the world’s third largest music market, is
affected by this trend. According to the German Phonographic Association (Deutscher
Phonoverband) the size of the German music market had to face a decline of roughly 25
percent. In 2002 alone, industry revenues dropped by further 11.3 %. Half a decade ago, in
1997, the music industry still had revenues of about 2.6 billion Euro, while in 2002 the
turnover was only about 1.97 billion Euro. Obviously, there is a lot at stake for the music
industry and the recently ongoing consolidation (e.g. take over negotiations between BMG and
Warner Music) shows that the industry is on the move.
Possible Answers For The Music Companies’ Problems
Analysing the reasons for this development, it becomes obvious that, similar to other fields of
the media industry, there are a variety of endogenous and exogenous factors affecting the
music industry. Only their combination and their concurring effects led to the development of
the current status quo.
The technological influence factors in the consumer market need to be mentioned first. About
ten years ago, it was still too expensive for the private user to buy the hardware that is
necessary for writing, copying and saving music files or CDs. Today, private consumers – for a
decent investment - have the technological capabilities to do that. Reaons: The increasing and
accelerating degree of maturity of hardware (combined with parallel designed user software),
progress in industrial production and associated economies of scale. Furthermore, with the help
of today’s fast PC processors, private consumers are able to process a large amount of digital
data (required by digitalized songs) and to save them on CDs and large hard drive capacities.
Another relevant factor is the increasing internet penetration in industrialised countries as well
as improving possibilities to transmit a larger range of bandwidths. In combination with the
compression format MP3 a faster transmission of a large amount of digital data is possible.
This strongly influences the possibility to create, to market and to distribute digital music data.
Additionally, due to the increasing maturity of hard- and software in the field of music, artists
took the opportunity to influence the development and production of music content during the
past ten years. For creating and marketing music content a private person is not solely
dependant on the big music corporate groups any longer. The industry’s attitude acts as a
further aggravating factor, in so far as instead of strategically build artists and formats, it has
always focused on short-term profit maximisation.
It is mainly the rapidly-spreading Peer-to-Peer (P2P) or File Sharing Technology that has had a
massive influence on the established industry structure over the last three years. The
introduction of the illegal download platform Napster, which made file sharing of MP3 data
available to a larger user base for the first time, and the establishment of its successors
Morpheus, BearShare and most of all Kazaa have boosted the illegal, i.e. unpaid, spreading of
music content. Taking into consideration, that Kazaa’s download software alone has been
downloaded more than 230 million times, it is comprehensible which further consequences this
might have on profit and loss situation of the music industry.
Interestingly, the music industry has not been able to find acceptable solutions for this
development so far. There have been numerous attempts in co-operation to establish competing
download platforms. However, to date they have not been accepted by consumers and therefore
are unsuccessful. This is surprising, since the national and the international music industry
have more or less the structure of an oligopoly. Disregarding single independent labels on the
national level, the number of the relevant music companies is lucid: BMG, Warner Music,
Sony Music, Universal Music and EMI. In the past these Majors dominated a music market
that was characterised by increasing turnover and high profit margins. Yet, the problems that
the music industry has to deal with today, are partly self-inflicted. In booming years, whith
stable revenues, it has neglected to fight against structural problems, such as the lack in
sustainability in the creation of artists and their development. Moreover, the industry did not
manage to create a sustainable business model focused on the new media and technologies.
Consequently, the industry was late to realize the imminent danger of increased internet usage
and the high advanced PC equipment in private homes.
Are there keys to a solution of the dilemma?
The developments described above, require the industry to rethink their processes in the fields
of artist management (A&R) marketing and distribution. The question is whether the music
economy needs to reinvent itself.
The problem has become virulent for the music industry. However, the right answers still need
to be found. Will the CD stay the music medium No. 1, given that huge amounts of MP3s can
be saved on current hard drives which are getting smaller and smaller and increasingly handy?
Will the music industry be able to earn money with a format that you cannot touch, which can
be exchanged in large quantities via internet? Will enough money be circulating in a reshaped
music economy to keep the conventional “Star System” alive?
There is perhaps one example that could pave the way for the industry: In 2003 a company
from an unrelated industry, in a way a nobody, succeeded with a new product: PC producer
Apple known for its personal computers for users in the creative sector, presented its new “I-
Tunes Music Store”: For the first time a working music download model based on the internet.
With more than two million paid downloads within two weeks after its introduction, I-Tunes
Music Store has demonstrated some first, convincing successes. During this short period,
Apple had a higher turnover than the competing download platforms of the Majors (e.g.
Musicnet and Pressplay) in their whole first year of operation. What was the success formula?
Difficult to say after this short period but Steve Jobs, CEO of Apple, succeeded in long-lasting
and difficult negotiations to convince all Majors to make their content available on this
platform. Currently there are only about 200.000 songs available on Apple’s platform. Yet, in
combination with an easily comprehensible and attractive price model (99 cent per download),
with extended usage and license terms (unlimited usability on several media) and a successful
PR Promotion, the “apple from an unrelated industry” provided a new impetus in a market
characterised by lethargy.
With the introduction of the “i-Tunes Music Store” pressure on the music industry has risen. In
Germany the big providers Universal Music, Sony Music, Warner Music, BMG and EMI,
together with Deutsche Telekom as technology partner, prepare a common download platform
which is supposed to be launched at the end of this year. The name of this new music web
catalogue: Phonoline. The platform will be based on an electronic distributional system that
has already been existing for years and which will be operated jointly by the record labels.
The question whether this offer will be successful and accepted from the market is still open.
From today’s point of view, Phonoline is rather a compromise than a thoroughly designed
marketing system designed for the needs of the consumer. In contrast to its competitors,
Phonoline is just a bunch of offers by the participating companies. If a consumer decides to
download a song by Christina Aguilera (who is under contract at a BMG label) they buy the
song under the terms and conditions of the respective Bertelsmann subsidiary. For playing a
song by Jennifer Lopez for instance, the consumer will have to conclude a contract with Sony.
As all companies set their prices irrespective of each other, there is no stringency for the offer.
First Hope Is Justified, Yet, A Further Structural Problem Remains
A first slight hope? At least the music industry can make out a ray of hope at the dark horizon
and got some hints on their seek for a solution. This, however, should not hold back the
industry to face a further challenge: the long-termed building-up of artists and their further
development. After all, despite the threat deriving from new technologies, there are artists such
as Herbert Grönemeyer, Nena, Robbie Williams, Madonna or Eminem who still succeed in
selling millions of copies of their albums. On the one hand Eminem’s album “The Eminem
Show” was the album with the most downloads in 2002, but on the other hand it was also the
album that sold most copies in the USA.
The music industry has realised its dilemma and is forced to develop and implement quickacting counter measures and strategies. A challenge to be won?
BPL BROADBAND POLICY LESSONS. CHAIR: MR BAUER
DISCUSSANT: MR MARSDEN, MR ZIMMERMANN
BPL 1.1
FROM BASIC SERVICE TO BROADBAND:
STRATEGIES FOR RURAL AND DEVELOPING REGIONS
Author: Professor Heather E. Hudson2, University of San Francisco, USA
Recent innovations in technology and policy are significantly increasing access to basic
telecommunications services in the developing world. For example, in many developing
countries, there are now more wireless lines than fixed lines; for many new subscribers, their
mobile phone is their first and only phone. This dramatic growth in connectivity is due partly
to the advantages of wireless technologies in fast deployment of new networks, but perhaps
more to the innovations in regulation and policy that have fostered innovation. Where countries
have introduced competition in wireless/mobile services, rates have come down, and
innovative wireless carriers have introduced features such as “pay as you go” using
rechargeable cards, and inexpensive text messaging. The result has been dramatic growth in
access to basic communications.
Yet basic voice communications are still not available in many rural and isolated areas.
Furthermore, access to broadband that would allow use of the Internet’s Worldwide Web and
other advanced services such as distance education and telemedicine, is still very limited
and/or expensive in most rural and developing regions. This paper examines how
technological and regulatory innovations might bridge this broadband divide. The paper also
explores how targeted subsidies may be used to increase broadband access. The paper
concludes with a summary of lessons learned from these innovations in technology and policy
that could help to accelerate access to affordable and reliable broadband connectivity in rural
and developing regions.
BPL 1.2
BROADBAND UPTAKE IN OECD COUNTRIES
POLICY LESSONS AND UNEXPLAINED PATTERNS
Authors: Johannes M. Bauer, Junghyun Kim, Steven S. Wildman, James H. Quello Center,
Michigan State University, USA
International comparisons of broadband diffusion reveal widely differing penetration rates. Most
attempts to explain this diversity narrowly focus on single causes (e.g., prices or policy measures).
However, to assist policy makers in formulating effective broadband policy frameworks a
multivariate analysis of the factors shaping uptake is required. As a first step in this direction our
paper reports the results of a cross-national econometric study of broadband uptake in the 26 OECD
countries in 2001.
The paper first reviews the nexus between the broadband policy framework and network and service
deployment. Based upon this analysis, we formulate a structural model of the broadband market.
The main variables included on the supply side are the degree of competition in the market, the
condition of the network infrastructure prior to the introduction of broadband, and cost factors such
as the density and distribution of the population. Disposable income, the availability of substitutes,
the prices for broadband and substitute services, and the availability of content are the main factors
included on the demand side. In addition, we model the effects on supply and demand of the policy
regime and of the "preparedness" of a country to adopt broadband.
We use the reduced form of the model to derive OLS parameter estimates. Data were collected from
a number of sources, including the OECD, the International Telecommunication Union (ITU),
national regulatory agencies, and service providers. Limitations in the consistency and availability
of data necessitated a cross-sectional approach. However, elements of a dynamic perspective are
introduced via lagged explanatory variables. As Korea is a unique case, we performed the analysis
with and without it to test for the robustness of results.
We find that the results are somewhat sensitive to whether or not Korean observations are included.
Estimates based on the full sample produce several statistically satisfactory model specifications.
As expected, broadband uptake is positively related to population density and the preparedness of a
nation (measured alternatively by the availability of computers and of network infrastructure) and
negatively related to the price of broadband service.
However, our estimates also show some unexpected results. For example, the inclusion of policy
variables did not produce significant parameter estimates. Moreover, once other factors are
controlled for, our estimates show a negative link between income per capita and broadband uptake,
which could be the outcome of a leapfrogging effect. We also find a negative relation between the
price of dial-up service and broadband penetration, which may reflect the presence of budget
constraints.
Overall our study explains only about one third of the variance in broadband uptake. In part this
may be due to the statistical challenges of working with a cross-national data set. It also seems to
affirm our view that unique effects are at work that deserve further study and which may only
become fully visible at a regional or local level. We conclude the paper with policy implications
from our findings and avenues for future research.
References
Bauer, Johannes M., Kim, Junghyun, & Wildman, Steven S. (in print) “Broadband deployment: toward a more fully
integrated policy perspective,” in: A. L. Shampine (ed.) Down to the wire: studies in the diffusion and regulation of
telecommunications technologies, Hauppauge, NY.
Bauer, Johannes M., Michel Berne and Carleen F. Maitland (2002) “Internet access in the European Union and in the United
States,” Telematics and Informatics 19, 117-137.
Bauer, Johannes M., Gai, Ping, Kim, Junghyun, Muth, Thomas A. and Wildman, Steven S. (2002) Benefits of broadband,
Report prepared for the Michigan Economic Development Corporation and MERIT, East Lansing, Michigan: Quello Center
for Telecommunications Management & Law, October.
JEL Code/Keywords:
JEL Codes : L96, L86, L5, O57
Keywords: Broadband, broadband policy, OECD, structural model, cross-national comparison,
econometric study
BPL1.3
COMPARATIVE ANALYSIS OF BROADBAND POLICY. A METHODOLOGICAL APPROACH
Authors: Inmaculada Cava, Regional Government of Valencia, Spain
Antonio Alabau, Luis Guijarro, Polytechnic University of Valencia, Spain
Alberto Jordan, Polytechnic University of Madrid, Spain
This paper deals with the early results of the Broadband Infrastructures Working Group (BIWG) of the Regional Government of Valencia (Spain). This group was created to study the
Broadband Policy issues as a first step to elaborate a Strategy and an Action Plan to accelerate
the deployment of broadband networks, especially in non-competitive areas of the regional
territory.
Broadband is considered as being an accelerator for economic development.
Nevertheless, the extent to which broadband infrastructure will cover entire populations or
geographic areas is still not clear. This fact has led governments to place emphasis on
facilitating access to broadband networks, especially in non-competitive areas, to avoid what is
called “digital divide”.
In fact, during late 90s, many Administrations in OECD countries have released their
broadband strategies (OECD, 2002). There is a wide range of government initiatives
structured in different ways and with specific targets and expected results. In this context, the
main concern of the BI-WG in its initial stage has been to examine these initiatives and to build
a clear taxonomy of adopted actions. This paper deals with the description of the BI-WG
activities and the results obtained so far.
The first step consisted of gathering information about the public initiatives being carried out
by government agencies in the Broadband Policy arena. The BI-WG members gathered
information about the following public initiatives: Wales (UK) (Analysys, 2001), Sweden
(Ministry of Industry, Employment and Communications, 2001), Italy (Task Force on
Broadband Communications Innovation , 2001), Canada (National Broadband Task Force,
2001) and USA (FCC, 2002).
The second step consisted of defining a Reference Framework to be used as a methodological
tool to create a taxonomy of adopted initiatives. The Reference Framework is based on the
Savage model (Savage, 2001) and sketches the adopted actions that constitute the intersections
between the targeted elements, the agents and the funding models. This approach allows
defining a comprehensive set of possible actions to cover all the range of possibilities
regarding Broadband Policy.
The third step consisted of evaluating this framework by using it to analyze the collected
initiatives. This task yielded some concluding remarks that are detailed in the final version of
the paper. Finally, this paper ends up with some ideas for further work.
References
1. Analysys, Commissioned by the Welsh Development Agency. (2001). Ubiquitous
Broadband Infrastructure for Wales.
2. FCC, Federal Communications Commission. (2002). In the Matter of Inquiry Concerning
the Deployment of Advanced Telecommunications Capability to All Americans
in a Reasonable And Timely Fashion, and Possible Steps To Accelerate Such
Deployment Pursuant to Section 706 of the Telecommunications Act of 1996 [on
line]. URL http://www.fcc.gov/broadband/706.html
3. Ministry of Industry, Employment and Communications, Sweden. (2001). The
development of the IT infrastructure - A publication about one of the priority
areas of Swedish IT policy [on line]. URL http://www.industry.ministry.se
4. National Broadband Task Force, Canada. (2001). The New National Dream: Networking
the Nation for Broadband Access [on line]. URL http://broadband.gc.ca
5. OECD, Organization for Economic co-operation and Development. (2002). Broadband
Infrastructure Deployment: The Role of Government Assistance [on line]. URL
http://http://www.oecd.org/pdf/M00020000/M00020255.pdf
6. Savage, James. (2001). International Models (Draft) [on line]. Canada National
Broadband Task Force. URL http://www.broadband.gc.ca
7.
Task Force on Broadband Communications Innovation, Minister for Technologies
(Italy). (2001). Report about Broadband Communications [on line]. URL
http://www.mininnovazione.it/broadband
IS INVESTMENT STRATEGIES: CHAIR MR ALKAS
IS 1.1
BUILDING THE REPUTATION OF FIRMS AND THE ROLE OF INSTITUTIONS
Author: Paul F. Phumpiu, Osiptel, Peru
Considering that telecom firms build their reputation from the continuous satisfaction of its
customers, we try to measure how the knowledge and information that telecom users have, and
their individual opportunity costs, affect their decision to file a formal complaint.
The provision of goods and services in an industry does not end with the market consumer
purchases. In the market chain, the follow-up on customers is as important, if not more, than
just selling. How well a firm does on the follow-up of its customers’ satisfaction is critical for
its survival and profitability. This is because the reputation of a firm or the brand it sells in the
market is partially built on customers’ satisfaction and how well they rate them. If the
customers’ rating is poor, then the market reputation of a firm or brand due to its customers’
satisfaction would also tend to be poor. Thus, when customers are not satisfied word of mouth
is spread in the market and, current or potential, customers are likely to stop buying or
recommending those services. On the other hand, if the customer’s rating is good, the brand
builds a solid market reputation and the firm can expect to survive and, possibly, grow on its
market share.
In a competitive market non-satisfied consumers can try new brands produced by other firms,
but when the market is not competitive they may have fewer choices or no substitutes at all. In
this case, the role of market institutions that care for the well-being of consumers tends to be
much more critical. Market institutions have to build market incentives through incentive
regulation, supervisory actions, and activities that inform and guide consumers about their
rights, so that the firm(s) in the market will behave as if they are in a competitive environment.
Thus, when there are substitutes goods or services, consumers penalize the firms with bad
reputation by not buying their products. However, when there are no close substitutes,
consumers can not penalize a firm with monopoly power or dominant position, and the
institutions that supervise the evolution of markets play the consumers penalizing role; usually,
by imposing sanctions.
Our estimated results for the telephone service in Peru show that the probability of users filing
a formal complaint is much higher when firms and market institutions have dissimilar
information and knowledge processing objectives, rather than when these objectives are alike.
Also, as the users tolerance to non-satisfactory contractual relationships decreases, the
complaining probability increases. In this context, dissimilar objectives between the regulator
and the regulated firm is not a sustainable situation, as customers would not only be insatisfied
with the firm that provide them with services, but also with the regulator.
IS 1.2
INVESTMENT BIAS AND ORGANIZATIONAL CODES
Author: Erik Bohlin, Chalmers University of Technology, Sweden
Sven Lindmark
This paper will elaborate on some possible drivers to investment bias, and in particular the
inertia of codified organizational practices in the face of technological change. Lately,
investments in telecommunications networks have been hotly debated, and examples of overinvestment (3G, dot.com) have been widely publicized. However, there are also cases of underinvestment, and this paper will in particular address drivers to under-investment by elaborating
upon the relations between organizational codes, technology and incentives.
There are several possible examples of under-investment: for instance technologies for
cyber security and dependability. Another example is the introduction of the next generation
Internet protocol - IPv6. IPv6 is a “classic chicken-and-egg” problem. Operators and ISP
providers have few incentives to introduce IPv6 networks since there is little demand at
present. Users do not demand IPv6 since there are not yet any perceivable benefits to the new
protocol. Manufacturers have consequently been slow to implement IPv6. However, IPv6
would clearly seem to be the better protocol in the long run. First and foremost IPv6 improves
the addressing and routing capabilities of the Internet, which is increasingly becoming a
problem with the current Internet standard (IPv4). For instance, there are reportedly “fewer
domain addresses available for China than either for Stanford University or MIT”. 3 Clearly,
this lack of addresses could create a problem for China as Internet penetration rates there rise,
as well as in other growing regions. With IPv6, IP increases address size from 32 bits to 128
bits. This represents an increase in address space by a factor of 296 (2128/232), totalling just over
4 billion*4 billion *4 billion *4 billion addresses. IPv6 also defines a multi-level, hierarchical
global addressing architecture. This feature is important since the Internet backbone depends
upon a hierarchical address system similar to that of a telephone network. Without an address
hierarchy, backbone routers would have to store table information on the reachability of every
network in the world. However, most players seem to be somewhat locked-in to IPv4 and its
possible enhancements, such as alternative ways to solve the address problem. Even for actors
in regions endowed with many IPv4 addresses, there may be reasons to adopt IPv6. For
instance, wide-spread adoption of the third generation mobile networks will require the
adoption of IPv6.
On a theoretical level, what are then some possible drivers to technological inertia, and
investment bias? Starting first with some definitions, investment bias is a systematic deviation
or skewness with respect to some standard or norm (here economic efficiency). Moreover, the
efficiency consideration that is of interest is from an ex ante point of view, ex post the
inefficiency could be due to random events. Technology is viewed in a dual sense, including
both knowledge and artifacts. The dual aspect of technology raises additional complexities.
The type of knowledge that is associated with a physical artifact may not be one-dimensional
but be thought of as a complex ‘multi’-kind: multi-technology, multi-relational, multi-nature,
multi-competence. Thus, an artifact can be viewed as an embodiment of a web of competencies
that is interrelated with the behavioral and material environment in complex ways. Finally,
investment decision making is considered in an organizational context, i.e. that decisions are
made in a multi-layered organization, where several organizational units may be involved in a
given investment decision.
In an organizational context, an artifact can be viewed as an embodiment of a web of
competencies that is interrelated with the behavioral, organizational and material structure in
complex ways. Put more concretely, the diffusion of a new technology within an organization
has consequences not only for the physical asset base, and is not only affected by the
economics of the existing physical assets, but also brings a momentum of organizational and
individual change which may be at odds with the existing structures. In particular, given the
strong increasing returns properties of the knowledge aspect of technology together with
durability of the physical capital, there will be inter-generational consequences developing.
To see how the inter-generational consequences develop, consider first the increasing returns
properties. Due to the durability of the physical capital, the unit must keep alive the set of
competencies that fit with this physical capital. Since the competencies for the old physical
capital have already been ‘acquired’, or more precisely assimilated by the agents in the unit,
there is generally a low cost of keeping these competencies due to the increasing returns
properties of information and knowledge. For instance, when knowledge is used there
generally occurs not a decay but a positive form of depreciation (learning). Moreover,
knowledge has public good properties due to the non-exclusive properties in consumption; i.e.
3
European Commission (2002, p 7).
transmitting the knowledge comes without loss of the knowledge. In a more restricted sense,
the knowledge may have quasi-public good properties, i.e. a mix of private and public, due to
the tacit nature of the knowledge, in which the degree of the private nature increases with the
tacit nature. Within organizational units in which tasks are narrowly defined, e.g. functional
units, the degree of tacitness will be lower within the unit, but higher between units.
Conversely, when units have more broadly defined tasks, there will be less degree of tacitness
between units but also comparatively higher tacitness within units due to the wider range of
activities.
Moreover, there are specific features with respect to the knowledge aspect of technology that
create even stronger increasing returns properties: codifiability (conferring cumulation).
Technology can be codified by governing laws and functional relationships to a greater extent
compared to many other forms of knowledge (such as management). Not only is there a
codifiability in terms of abstract knowledge: the physical artifact is itself codified knowledge.
The artifact becomes the ‘book’ by which agents learn by doing and teach others. As a set of
artifacts share the same basic properties, agents can generalize from a sample of artifacts,
which is useful when faced with similar types of artifacts. Depending on the type of code (e.g.
level of abstraction), and depending on the task associated with the artifact (e.g. R&D or
maintenance), the dissimilarity of a new artifact will have differential impacts. More generally,
one can consider that there is a technological distance between different types of artifacts and
different types of technological knowledge, the distance being defined by both the level of
aggregation (abstraction) and the factorized ‘components’ making up the identified aspect. Put
more concretely, from the point of view of an abstract and aggregate description of a
technology, there may be similarities, but from the point of view of an artifact there may be
great dissimilarites due to design variations and differences in the interlocking of several
technologies and sub-technologies within an artifact. Thus, one can associate technologies with
different kinds of codes and sub-codes, depending on the task that is to be carried out with
respect to the the technology. In turn, by learning the appropriate code and sub-codes, by
acquiring skill in using it and in generalizing with respect to that code, the code will have a
cumulative nature, although temporarily so if there are discontinuous technology changes. Put
differently, there will be increasing returns with respect to continuing with the acquired code.
For each organizational unit there will then emerge an organizational code corresponding to
the task of the unit, and the task of the unit will become the organizational goal. 4 The
organizational code will in turn be highly influenced by the set of artifacts that the unit is
responsible for. Thus, one can conceive of technology-related codes that are specific to an
organizational unit. Moreover, as technologies and the corresponding artifacts become more
mature and the diffusion process reaches higher levels, the codes will become increasingly
solidified. If we now allow for the necessity to search for decision alternatives within an
organizational unit, what may happen is that the local generation of decision alternatives is
constrained by the codes, which in turn are constrained by the definition of the organizational
goal, which in turn was based upon the appropriate division of labor at an earlier stage of
technology. In Simon’s (1964) terminology, the goal constraints and the objective function of
each organizational unit together generate decision alternatives, the generation being
determined by the organizational algorithm. There will be a reinforcing tendency toward
stability, though, since the process of local search has its own momentum due to increasing
returns to local search. Specifically, there will be a linkage between generations of agents in
the unit, since there will be an overlapping pattern of artifact replacements and replacement of
human agents. As a new agent enters into an organizational unit, this agent could in principle
create a momentum of change since the new agent comes from a different environment and
with a different code. However, there will be a strong tendency for new agents to assimilate the
organizational codes and the sub-codes, since by the codes, groups and sub-cultures are created
4
The idea that organizations develop an internal code so as to minimize costs of information transmission
received early attention by Simon (1964) and Arrow (1974).
and sustained. With a shared sub-code there will be low costs of communicating. In turn, this
process is reinforced by the long durability of artifacts and the fact that agents and artifacts are
not replaced simultaneously. Furthermore, once the code has been acquired there will be a
strong incentive to keep using it since learning a new code will be viewed as a considerable
investment, the viability of which will be compared with the variable costs of the competence
in place.
Now the question is whether the local increasing returns properties by themselves can create
inefficiencies (such as investment bias), without any agency-type incentive problem being
present. Both Simon (1964) and Simon (1969) intimate that this can be the case, even with
satisfying goals. When action-outcome sequences are not additive, i.e. non-independent, we
can never be certain that a partial sequence of actions that accomplishes certain goals can be
augmented to provide a solution that satisfies all conditions and all goals, even though they are
satisfying goals. Being interpreted, with an organizational division of labor that in essence has
institutionalized different search paths through the task assignment, the local search may
generate global inefficiencies while satisfying some (local) goals. This problem becomes
particularly acute as the local decision generators are put in place so as to achieve division of
labor, being interlinked in a means-end hierarchy, or with an alternative analogy, consisting of
decomposed and interrelated ‘algorithms’ in which the goal and constraints are influenced by
decisions in other units. The chain of decisions will then lead to overall inefficiencies, driven
by locally increasing returns. If there are information costs due to limited rationality, this
inefficiency will persist longer. To change the local search paths, interventions are needed.
However, what is not necessarily clear is that this inefficiency would occur ex ante since the
decision sequence is characterized by search, i.e. the alternatives are not fixed from an ex ante
point of view. What emerges is the need to adapt, rather than investment bias.
However, if we now include personal costs (from incentives) in this local increasing returns
system, it may suffice with small personal incentive costs to get large inefficiencies. Put
differently, due to the underlying increasing returns dynamics, the addition of a small selfinterest-driven cost may have large consequences for organizational inertia. Even though
agency theory has captured the critical influence source, it is hypothesized that it is the
combination of locally increasing returns and agency that creates large inefficiencies. Consider
for instance retraining. Retraining will involve personal effort and possibly hurt personal pride,
while keeping the current competence has low costs. Moreover, it is not only that the code
taken by itself is costly - the interdependence among codes will make the change even more
costly. Viewing the technology competence question as an investment, the presence of an
interrelated structure of codes and sub-codes will impose adjustment costs, making the hurdle
rate for the knowledge investment even higher, all else equal. These adjustment costs may
accrue when a new code is not only an addition to existing codes and skills, but necessitates
relearning and changes in related skills and codes. Thus, there will be a strong tendency of
inertia with respect to organizational codes for cost reasons, not necessarily involving any
opportunism or guile. (If personal motivations are added, though, the personal impact may be
comparatively far greater than taken by itself due to the increasing returns properties of the
codes.) Changes in organizational codes will be justified only with considerable differences in
cost and benefits between an old and a new code (from an ex ante standpoint), and the costs of
change will be increasing with the complexity of the existing code. Put differently, the more
interrelated an existing code is, the greater ex ante economic difference there will be between a
new and an old code before it is adopted by an incumbent, all else equal. (This is a case of
constant adjustment costs per code interdependency.) Further, the more disruptive
(competence-destroying) a new code is, the greater ex ante economic difference there will be
between a new and an old code before it is adopted by an incumbent, all else equal. (This is a
case of increasing adjustment cost per code interdependency.) However, there are also
combinatorial possibilities that accrue with an interrelated set of codes that are compatible, at
least weakly so. One can conceive of ‘distances’ between codes in terms of dissimilarities and
correspondences. With too much compatibility (too little distance), the codes will be exact
copies, and no new combinations will emerge. With too much incompatibility, communication
will not be possible; and with a sufficient degree of incompatibility between the new and old
organizational codes, all of the old code must be replaced, at great cost for the incumbent
agents. If relearning is more costly for incumbent agents compared to new agents, the
incumbent agents will also tend to be replaced, all else equal.
However, before the replacement of skills and management is undertaken, a competitive
disadvantage may have emerged due to the combination of agency problems and competencerelated increasing returns. This is a way to make the asymmetric transition costs of Ames and
Rosenberg (1963) more precise. To recapitulate, an incumbent will not necessarily be
disadvantaged relative to an entrant who has a new technology (new competence) and new
agents, given that new agents can be hired by the incumbent firm and that managerial resources
are not limited. In the extreme, the incumbent can simply scrap the whole firm, fire all of the
agents (if there are differential learning costs) and replicate a new firm at no disadvantage, or
alternatively fire agents working on a specific project and create a new project. Still, this
simplistic logic does not hold when competition is not perfect and when firm-specific assets
are involved. Put differently, the existing competence base may be useful depending on the
interdependencies of the existing codes and on the combinatorial possibilities that exist with
the new competencies. Thus, when there are increasing returns accruing from existing
competence bases and firm-specific assets, there will be an incentive to keep them from a
managerial point of view.
Finally, there are selective intervention costs, and these may be quite high. For instance, if
intervention can be expected to come continuously, agents will adjust their behavior, possibly
seeking to influence the expected intervention for their own ends. Moreover, with management
always on their back, lower levels will not be motivated to carry out their tasks in the best way.
The outstanding idea of economics since Adam Smith has been that decentralized decisionmaking leads to the best possible state, and decentralization has been a central management
idea with known results.
Thus the circle starts to close. In general, due to the combination of competence-related
increasing returns and durable artifacts, decentralized decision-making and agency problems,
there will be a trend toward technological conservatism. There will be strong forms of
organizational inertia when a technology changes and there will emerge a need to intervene
and change in order to tilt the decentralized decision-making. However, due to increasing
returns momentum and information asymmetries between management and the organizational
units, and to costs of intervention, the process may have come quite far, and the change may
come comparatively late. In order to change the set of internal codes and create new patterns,
intervention may be quite drastic. From a total cost point of view, intervention costs are not
only related to incentives but also due to the interdependence of organizational systems and the
costs associated with organizational changes. Thus, organizational inertia may be obtained
despite the fact that from a partial investment point of view, organizational change is
warranted. Investment is just one of the activities in a firm, and the firm consists of a complex
web of interrelated activities, assets and competencies.
Thus, we see here some organizational properties that may mitigate against the adoption of
new technology, such IPv6, despite its possible advantages.
IS 1.3
REGULATORS VERSUS MANAGERS:
WHO HAS A STRONGER INFLUENCE ON STOCK PRICES OF TELECOM OPERATORS?
Authors: Lutz Johanning5, Ludwig-Maximilians-Universität, European Business School,
Germany
Ernst-Olav Ruhle6, Law Firm Piepenbrock Schuster, Germany
Over the last years telecom companies’ stock prices have seen a strong up an downward
development. Incumbent operators often argue that some regulatory decisions had a very
negative impact on their stock price performance.
The purpose of this paper is to find out whether management activity or rather regulatory
decisions are responsible for the stock price performance of telecom companies. Therefore we
analyse the impact of the ten most important regulatory decisions and ten significant
management decisions on Deutsche Telekom’s stock price for the time period of 1996 to 2002
by using event study methodology. Management decisions focus on e.g. M&A activity or the
decision to enter in the UMTS market in Germany. Regulatory events cover important
decisions on interconnect or unbundling of the local loop as well as e.g. the introduction of
Carrier Selection in local networks into the German Telecommunications Act. All events have
been taken from the period 1996 to 2002.
We find out that the influence of regulatory decisions is relatively small. We also show, that
the majority of management decisions have negatively impacted Deutsche Telekom’s stock
price performance. Thus, Deutsche Telekom’s negative stock price development is mainly a
result of poor management performance and not a result of decisions of the regulatory
authority influencing the competitive environment
BS: BROADBAND STRATEGIES: CHAIR MR VANBERG
DISCUSSANT: MR MARSDEN, MR HAUCAP
BS 1.1
RENAISSANCE OF THE WIRELINE INDUSTRY: PROFITABLE REVENUE GROWTH
AFTER THE PARADIGM SHIFT IN THE TELECOM INDUSTRY
Author: Dieter Lange, A.T. Kearney, Germany
Philip Zimmermann, Carsten Zimmermann, Ronald Klingebiel,
Cambridge University, UK
The repercussions of the burst of the Internet bubble and the worldwide economic recession
have hit the Telecom industry harder than any other industry. Whilst several mobile operators
were forced to exit geographical markets they had just entered at considerable cost, several
incumbent telecom operators themselves moved dangerously close to the brink of insolvency.
In contrast to those gloomy outlooks for incumbent wireline operators, a study on profitable
revenue growth jointly carried out by AT Kearney and Cambridge University reveals that the
downward drift for European incumbents is stoppable. This is also authenticated by the results
of an extensive operator survey and key expert interviews. Furthermore, findings predict a
renaissance for those wireline incumbents that do not excessively engage in pure cost cutting
but instead stimulate Organic Growth. While it is apparent that there is no universal master
plan for all European Operators, commonly applicable patterns have been identified from best
practices. These patterns include levers, which encase the telecommunication value chain and
5
6
Ludwig-Maximilians-Universität, Munich, and European Business School, Oestrich-Winkel.
Law Firm Piepenbrock Schuster, Düsseldorf.
focus on product management, strategic pricing and product commercialisation, as well as indepth analysis of key product offerings such as DSL, IP and Content solutions. It will be
unequivocally made clear that fixed incumbent operators need to understand – viscerally, and
not just intellectually – the imperative to reinitiate Organic Growth by effectively balancing the
CapEx/Revenue/Productivity-Equation.
BS 1.2
HOW TO SUCCEED IN THE WLAN - A LESSON FROM WIRED ADSLS IN KOREA
Author: Jae-Kyung Kim, KT, Korea
It is irreversible trend from wired into wireless. It’s not an exception in the Internet. Korea is the
most developed country in the field of wired broadband Internet services and now tries to keep the
fame in the wireless Internet. The subscriber number of broadband Internet services using the
ADSLs and cable modems, is well over 10 millions as the date of October 2002. That means more
than 70% of populations are using broadband Internet, or 22% of households nationwide. .
Recently, Wireless LNA (WLAN) is important as the methods of wireless broadband Internet.
KT, the first service provider in Korea, supplies the WLAN service (NESPOT). There are about
7,500 hotspot zones and 12,000 subscribers are using the WLAN service.
The objective of this study is to find out key success factors to the WLAN services from the
lesson of ADSL in Korea and the problems to be solved for the development of WLAN services.
Firstly, on the side of supply, Korea has a distinctive feature at the high geographic density. About
80% of the populations live in the big cities, and it is possible to approach the critical mass more
rapidly. Moreover, service providers have the benefits from cost reduction, especially due to the
bundling wired and wireless broadband Internet services. For example, the customers using the
ADSL can enjoy a WLAN service unlimitedly only at the price of additional 1/3 of ADSL (about
US$8).
Secondly, on the side of demand, there are a lot of people and communities who are familiar with
Internet usage and want to share their experiences through the Internet, and they are the major
customers for the wireless Internet. To meet these demands, there is a big progress in the field of
contents in both quantity and quality. For example, Internet traffic into Korea from other countries
has reversed that of out of Korea,
Thirdly, on the side of policy, Korean government is driving the Internet educational programs
and has the plan to develop new IT services such as digital TV, next generation mobile services,
post PC, digital content, etc.
WLAN, however, has some problems to be solved for the success in the market. Firstly, there is
no technological standard for the unlicensed frequencies, 2.4 GHz. Nowadays, government plans
to reallocate 2.3 GHz from the use of fixed wireless local loop into the use of ‘portable Internet
service’ which gives the any where and any time connectivity regardless of wireless terminal. Both
WLAN service providers and mobile service providers want to receive the frequencies, which will
make the technological standard more difficult.
Secondly, It isn’t easy to expand the hotspot zones because of cost problem and necessary outdoor
solutions to interoperate among other operators WLANs.
I hope these Korean WLAN implications give the help to other service providers that want to
succeed in the risky new service market and share their experience as well.
BS 1.3
GERMANY’S BROADBAND NETWORKS –INNOVATION ON HOLD
Author: Stefan Heng, Deutsche Bank Research, Germany
Editors: Antje Stobbe, Sabine Kaiser
• Advances in technology are whipping up competition between formerly unrelated segments:
as a means of internet access, fixed-line telephone networks could potentially be challenged by
broadband TV cable and powerline.
• Germany’s cable network is handicapped here by its technical structure.
It is designed for large-scale, general dissemination of images rather than direct contact
between specific individual connections. So it urgently needs upgrading.
• Fragmented organisation and ownership of the German cable network are blocking essential
investment; outdated infrastructure is obstructing promising new fields of business.
The network must be totally restructured.
• The cost of modernisation is enormous; all cable business in Germany hence entails high risk.
Ultimately, only big players with long-term business models have a realistic chance of
weathering the competition. To be successful at all, network operators will have to market the
advantages of their technology much more effectively.
• Powerline is another means of accessing the web. It is offered by electricity utilities: data are
delivered on piggyback with electricity. Customers were not sufficiently keen on powerline,
however. But its lack of success was largely due to technical problems, and is not a reason for
abandoning the idea of using powerlines for data transmission.
• Inhouse powerline, a powerline offshoot, is an alternative with prospects in certain areas.
Inhouse powerline combines powerline technology within the premises with telephony beyond
the premises. It is not suitable for the large household market. But it does have good prospects
in public buildings where multiple web access is required.
• In the medium term, the telephone network will remain the main means of internet access for
the bulk of customers in Germany and elsewhere, for technological and economic reasons. But
alternatives such as cable or inhouse powerline have good chances of being successful in
certain niches.
ICT IMPACT OF ICT I: CHAIR: MR BARANES
ICT 1.1
TELECOMMUNICATIONS INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
Authors: Ishaq Nadir*, New York University, USA
Banani Nandi, AT&T Shannon Laboratories, USA
*Support from the C.V. Starr Center for Applied Economics of New York University is
gratefully acknowledged. The authors also wish to thank Hyunbae Chun and Ayda Erbal for
their valuable help on this paper
The term infrastructure generally describes large social overhead capital such as roads bridges,
sewer facilities, electricity generation and distribution, and communication networks. These
infrastructures provide the basic framework for a nation to support essential public services in
order to achieve higher economic growth and a better quality of life. Communications
infrastructure, particularly the telecommunications infrastructure, provides facilities for
communications and saves time, energy, labor and capital by condensing the time and space
required for production, consumption, market activities, government operation, educational and
health services.
In recent years, the world has experienced an explosive growth in
infrastructure technology and its applications, particularly, in telecom industry. Therefore, for
optimum utilization of this technological change, it is extremely important to evaluate the
contribution of the telecommunications infrastructure to economic growth and productivity.
There are several studies that use aggregate time series and cross section data to investigate the
relationship between telecommunications investment and economic development. Their
analyses show a strong positive relationship between the investment in telecommunications
and economic development.
These aggregate level studies though very useful, do not
distinguish between the direct and indirect contributions of investment on telecommunications
infrastructure towards the growth of various industries and the aggregate economy. The direct
contribution of the investment in telecom sector to the aggregate economy emerges from
superior productivity growth in the telecommunications industry whereas the indirect effect
results from the use of telecommunication services in other sectors in the economy. For
example, due to rapid technological change and productivity growth, the prices of
telecommunication services have declined significantly together with significant improvement
in quality.
This phenomenon has encouraged all other industries to substitute
telecommunication service inputs for relatively high priced traditional inputs, such as labor and
capital and increased the cost efficiency. These effects along with the network externality
effects of telecommunications infrastructure are difficult to identify and measure. These
effects could be best analyzed in a more disaggregated framework. Based on the existing
research in this area, two measurement methodologies are highlighted in this paper. One
approach is to use the Input-Output (I-O) framework (Cronin at el, Sunders Associates) and
another approach is to capture the contribution of telecommunications infrastructure by
estimating econometric cost model (Nadiri and Nandi). Analysis in this paper suggests that the
benefits derived from the telecommunications infrastructure capital is positive and varies
considerably across industries. At the aggregate level, the total benefits from this infrastructure
is rather sizeable, about 30% to 40% and the effects of this type of capital on input such as
labor, material, and capital are not neutral.
Bibliography:
1. Cronin, F. J., Edwin B. Parker, Elisabeth K. Colleran, and Mark A Gold (1991),
‘Telecommunications Infrastructure and Economic Growth: An Analysis of Causality’,
Telecommunications Policy, 15(6), pp. 529-535.
2. Cronin F. J., E. K. Colleran, M. A. Gold, P. L. Herbert, S. Lewitzky (1993), “Factor Prices,
factor substitution, and the relative demand for telecommunications across US Industries”,
Information Economics and Policy, 5 (1993), pp. 73-85.
3. Cronin F. J., E. K. Colleran, M. A. Gold, P. L. Herbert, S. Lewitzky, (1997), ‘The Social rate
of Return from Telecommunications Infrastructure Investment’, memo.
4. Nadiri, M. I. and T. Mamuneas (1994), ‘The Effects of Public Infrastructure and R&D
Capital on the Cost Structure and Performance of the U.S. Manufacturing Industries’, Review
of Economics and Statistics, 76(1), pp. 22-37.
5. Roller, L.H. and Waverman, L., (1996), ‘The Impact of Telecommunications Infrastructure
on Economic Development’, in Peter Howitt ed., The Implications of Knowledge Based
Growth for Micro-Economic Policies, The University of Calgary Press, Canada.
6. Saunders, R.J., J.J. Warford and B. Wellenius, (1994), Telecommunications and Economic
Development, Second Edition, A World Bank Publication, The John Hopkins University Press,
Baltimore.
7. The NITA Infrastructure Report, Telecommunications in the Age of Information, and (1991)
Washington DC: U.S. Department of Commerce
JEL Code/Keywords:
JEL Codes D24, D57, D62
Keywords: Telecommunications Infrastructure, network externality, economic growth,
productivity
ICT I 1.2
AN UPDATE ON ECONOMIC GROWTH
AND TELECOM INFRASTRUCTURE IN LATIN AMERICAN
Authors: Federico Kuhlmann7 and Laura Jácome8,
Instituto Tecnologico Autonomo de Mexico (ITAM), Mexico
The construction of analytical models to establish and study the correlation between economic
growth and telecommunications infrastructure has been the topic of numerous studies, and
there is no doubt that economic and telecommunications indicators are positively correlated,
even though defining which one is the cause and which one the effect is often still a matter of
disagreement. Most discussions agree on the fact, that an adequate level of telecom
infrastructure, even though not sufficient, is necessary for economic growth, but that telecom
infrastructure, by itself, cannot guarantee economic growth. Frequently, the relation between
economic growth and technology is represented by line penetration (teledensity) and economy
by indicators based on GDP. For example, in a cross-country analysis, by fitting a nonlinear
model to teledensity and GDP data, it can be speculated that a country whose data are below
the curve, can expect a fast growth of the existing infrastructure since it displays a deficit in
telephone lines and has an economic level that would act as enabler to stimulate telecom
infrastructure deployment. Similarly, a country located above the model, has probably more
lines than it needs in order to continue its development at a similar pace as in the past.
The aim of this paper is to provide a frame of reference to analyze the correlation between
telecommunications infrastructure deployment and economic growth for Latin American
countries. This frame of reference uses simple econometric models, based on time series for a
set of 19 Latin American countries in an interval of 25 years, which relate economic level with
development of access infrastructure. It must be stressed that countries in the Latin American
7
8
Telematics Engineering, kuhlmann@itam.mx
Computer Center, ljacome@itam.mx
region share some characteristics (social, economic, political and demographic) that cannot be
found in European or other North American nations.
It is found that 7 of the 11 countries whose teledensities are located above the adjusted curve,
have a state-owned monopoly in the local service market (Honduras, Costa Rica, Panama,
Belize, Uruguay, Bolivia and Ecuador), while only 2 of the ones which are located below the
curve have a monopolistic operator (Nicaragua and Paraguay). The introduction of competition
and privatization under the prevailing regional conditions (such as the lack of access to capital
markets, strong dependency between regulators and government, political and economic
turmoil) has not necessarily produced the expected growth results in terms of fixed line access.
In Latin-American countries where competition has replaced monopolistic regimes, the market
structure did not change much: liberalization did not stimulate market entry of many operators
willing and able to compete in quality and prices, the state owned monopoly was rather
replaced by one or two great (often multinational) companies), and governments have not
necessarily succeeded in attracting neither a sufficient number of operators nor sufficient
capitals. In our frame of reference, some monopolistic operators have shown that they can
indeed satisfy the market demand and foster economic growth, provided their operational
structures and methods are suitably modified to make them more efficient, and imposing
growth and development goals (universal access goals, in which new operators are frequently
not included).
For most of the smallest economies in Latin America, a monopolistic market structure has been
sufficient to reach and sometimes exceed the teledensity levels that could be expected
according to their GDP per capita, as displayed by the model. In contrast, bigger economies
like Mexico, Argentina and Venezuela (3 countries located below the curve) operate in a
competition regime. Thus, it can be argued that, at least in some cases, competition has not (so
far) lived up to expectations, since infrastructure development and growth are still below the
required levels to support and foster long term economic growth. These facts could lead to the
question, if following the fashionable world-wide trend of liberalization, was timely and
adequate in many of the Latin American countries under study. In fact, even though significant
numbers of new competitors are active in the region, the established former monopolistic
operators have retained significant portions of their markets.
This study does not pretend to draw conclusions based purely on simple analysis tools, but
rather tries to identify countries, whose evolutions show behaviors which are significantly
different from what could be expected under the circumstances, leading to discuss and explain
possible origins of these behaviors (for example, inadequate legislation or non-independent
regulators). The importance of an adequate telecom infrastructure, particularly in undersupplied countries, cannot be overemphasized. Whether or not telecom development is cause
or consequence of economic growth, both of them are undoubtedly necessary for narrowing the
digital divide between and within nations. Telecom development, however, cannot be
guaranteed simply by modifying the structure of the sector.
ICT I 1.3
Parallel Session: DEVELOPMENT OF INTERNETACROSS TRANSITION ECONOMIES
Authors: Maria Vagliasindi, European Bank for Reconstruction and Development, UK
Pietro A. Vagliasindi, University of Parma, Italy
In a global and innovation driven economy, firms using the tools of the “New Economy” are
expected to have a comparative advantage in terms of productivity and growth. Future
economic competitiveness will depend on their ability to survive and successfully expand their
business operation in this new framework. More specifically, to improve their competitiveness,
the use of the tools provided by new telecommunications technologies such as the Internet, can
play a crucial role to reduce transactions costs and to allow exchanges that otherwise would not
take place.
There has been an extensive literature trying to quantify the contribution of technology in
general and in particular of Information Technology (IT) in achieving the US productivity
acceleration of the late 1990s with has generated a lively debate. The role and contribution of
IT to increase productivity and growth has been also been extended for selected OECD
countries. There is still limited empirical evidence on transition and developing economies,
also due both to lack of adequate or reliable census data, with most of the analysis focusing on
cross-country analysis. This paper attempts to tackle similar issues considering new
microeconomic evidence from survey data from a major enterprise level survey (implemented
by EBRD and the World Bank in the summer of 1999) and on business case studies consisting
of in-depth interviews of general directors and senior management of enterprises across
selected countries in the region carried out in the summer of 2000.
It discusses some of the key features of the Internet sector across transition economies,
describes the key explanatory variables influencing the use of the tools of the “New Economy”
(here measured by the use of Internet), such as the degree of innovation and the extent of
competitive pressures to which firms are exposed and country level variables (including
control variables, such as GDP growth and political and civil freedom, as well as infrastructure
development). It also attempts to measure the contribution of the new economy (use of the
Internet) to better enterprise performance, controlling from the other enterprise level factors
influencing performance.
In particular we use ordinary two-outcomes probit regressions to analyze what types of
enterprises are more likely to adopt and use the Internet and standard OLS analysis to quantify
the contribution made by the use of the Internet in terms of enterprise performance.
Our key regressions results and can be summarised as follows:
(i) Private enterprises (particularly private de novo) are more likely to adopt the Internet. This
result confirms that private sector orientation increases the likelihood of Internet use. The size
of enterprise is also very significant and positively correlated to adoption of the Internet. In
terms of other enterprise-level variables innovation as well as pressures from competition is
positively and significantly associated to the use of Internet. We also control for urbanization
effects, as captured by different population density dummies to find out empirically which of
the countervailing forces leading towards agglomeration or de-agglomeration prevails. As
expected we find out that Internet is likely to be associated with greater agglomeration, raising
concerns on the risks on a digital divide. Internet is associated to better enterprise performance
and is more likely to be adopted in countries characterised by higher income, democracy, better
basic infrastructure.
(ii) The use of the Internet is positively and significantly associated to better enterprise
performance, even controlling for many of the other enterprise and country level variables that
are associated with enhanced performance.
Summing up, the use of advanced telecom services represents a great opportunity for
transition economies and accession countries to accelerate progress in the transition process.
However, for them to make a solid contribution to long term growths markets must be allowed
to work and not be held back by non-supportive regulatory frameworks.
References
Estache, A., M. Manacorda, and T. Valletti (2002) “Telecommunication Reforms, Access
Regulation, and Internet Adoption in Latin America”, World Bank, mimeo, March 2002.
Hargittai, Eszter (1999) “Weaving the Western Web: explaining differences in Internet
connectivity among OECD countries”, Telecommunications Policy 23, pp. 701-718.
Kiiski, S. and M. Pohjola (2002), “Cross Country Diffusion of the Internet”, Information
Economics and Policy, 14, pp. 297-310.
Norris, P (2000), “The Global Divide: Information Poverty and Internet Access
Worldwide”,available at http://www.ksg.harvard.edu/people/pnorris/acrobat/IPSA2000.pdf
JEL Code/Keywords:
JEL Codes D4, F14, O52, P31
Keywords Internet economics, New Economy, Public policy, Transition economies
EC NEW EVIDENCE ON E-COMMERCE IN EUROPE: CHAIR: MS PREISSL
DISCUSSANT: MR WHALLEY
EC 1.1
E-BUSINESS IN SERVICE INDUSTRIES: USAGE PATTERNS AND SERVICE GAPS
Author: Brigitte Preissl9, German Institute for Economic Research, DIW, Germany
1
Introduction
The handling of internal and external business procedures in electronic networks (short: ebusiness10) has provided opportunities for process and product innovation in all industries.
These opportunities have been taken up by firms in different industries with varying intensity
(see E-biz Market Watch 2002). The present paper will examine usage patterns and impacts of
e-business in selected service industries. Particular attention will be paid to the heterogeneity
within the service sector and to country differences.
Service industries have long been regarded as industries with little scope for the use of
technical systems, poor productivity improvements over time and a mainly local orientation
(see, for example, Miles 1996 and Miles and Boden 2000). This has changed dramatically with
the introduction of information and communication technologies (ICT) and the new options
available in globally oriented electronic networks (Barras 1986, Miles and Boden 2000). Many
services show a high information intensity, and hence, tools that facilitate the proceeding and
diffusion of information are likely to have an impact on the way services are generated and
delivered (Miles 1993). Especially the options arising from internet-based e-business models
may be used by service firms to streamline procedures or to develop new innovative offers.
Services that have a high information content and those which assist other firms in realising
networked systems benefit from the diffusion of information technology and are drivers of
technical change in their own business as well as in that of their customers (Preissl 1998).
Indeed, computer services show the highest share of innovators of all business services in
Germany (Czarnitzki/Spielkamp 2003).
However, it can be assumed that due to fundamental differences in the nature of services
provided, not all services can benefit to the same extent from electronic systems. Furthermore,
the use of e-business may differ between service sectors in different countries because of
differences in business climate or market dynamics (Preissl 1998). The impact of e-business on
service activities and eventually on performance and market constellations will depend on the
type of services considered and the drivers of market development. It can be assumed that
services that have used information technology intensively over the last decade will also be
intensive users and/or forerunners in the adoption of e-business.
The empirical data presented here have been derived from a company survey which has been
conducted in eight service sectors across the EU. From these eight sectors four sectors have
been chosen for the present analysis. The criterion for selection was comparability with respect
to market orientation, regulation intensity and performance indicators. The dynamics of growth
of the service industries analysed here varies between countries (E-biz Market Watch Group
2002, see also Preissl 2000). Country comparisons allow to observe specific specialisation
patterns and possible deficits: Complete data sets are available for France, Germany, Italy and
the UK.
It will be particularly interesting to have a closer look at the situation in Germany, since this
country is generally considered a ‘service laggard’ (see summaries of the debate in
Cornetz/Schäfer 1999 and in Stille, Preissl, Schupp 2003). On the basis of the empirical
material on e-business available from the survey, it will be possible to check, if the general
lack of service sector dynamics also holds for the introduction of innovative technology-based
business models in service firms. If service sectors in Germany, compared with their main
9
The author would like to thank Andreas Gildner and Philipp Köllinger for useful comments.
E-business is used in this paper as comprising external electronic links, i.e., e-commerce relationships with
suppliers, business partners and customers as well as the use of integrated networked systems in a company’s
internal procedures.
10
competitors in Europe are reluctant to introduce e-business adoptions, the service gap gains
another dimension. The gap is usually identified in oversimplifying terms of shares of services
in total employment and value added in a country compared with other countries. It has been
pointed out that these indicators are not relevant to estimate the structural ‘soundness’ of an
economy (Stille, Preissl, Schupp 2003) which rather rests on the systemic context that makes a
particular mix of industries successful. However, undoubtedly, the performance of services that
provide essential inputs in many processes of production and efficient services to private
households plays an important role in generating a modern services-manufacturing mix. Here
the use of advanced network technology and its implementation in successful business models
is a key driver.
This leads to two central research questions which will be discussed in this paper: (1) how is
the heterogeneity of services reflected in their use of ICT and e-business adoptions across
Europe? and (2) do German service industries differ from other European countries with
respect to the use of e-business opportunities?
EC 1.2
A EUROPEAN PANEL APPROACHOF THE E-CONSUMER11 12 13
Author: David Flacher, Ecole national Superieure des Telecommunications, France
Retail consumption on Internet did not experienced until now the radiant future that was
predicted. Should we conclude that the low take-off of B2C means that Internet is not the core
of a revolution of exchange forms? The question should probably be raised in a different way.
Internet can play various roles in intermediation between consumers, producers and
distributors. The notion of “quasi-consumption”, introduced here, seems to be more suitable
than the one of “consumption”. From the Netvalue panel in four European countries (England,
France, Denmark and Italy) and over two periods (April 2001 and April 2002); we investigate
the navigation and quasi-consumption habits in these countries. Constant facts can be
exhibited, but also learning, specializing and lassitude phenomena. These analyses are carried
out mainly using data-mining tools.
This research was funded by a European grant (STAR project, IST programm - Socioeconomic Trends Assessment for the digital Revolution).
This paper is planned to be presented in a workshop organised by project STAR on
“Experiences at the frontier of Virtual Marketing”. The workshop includes three presentations
on e-CRM (Assessing e-CRM developments, e-CRM in the Financial Industry, its
Employment Implications) and contrasts them with US experiences (e-commerce in the home
mortgage sector) and the present paper.
The author acknowledges Bernard Burtschy for his help and suggestions, Ludovic Lebart for
his comments, Isabelle Bloch for her advices, Laurent Gille and Claire Charbit for their
encouragements.
11
This research was funded by a European grant (STAR project, IST programm - Socio-economic Trends
Assessment for the digital Revolution).
12 This paper is planned to be presented in a workshop organised by project STAR on “Experiences at the frontier
of Virtual Marketing”. The workshop includes three presentations on e-CRM (Assessing e-CRM developments, eCRM in the Financial Industry, its Employment Implications) and contrasts them with US experiences (ecommerce in the home mortgage sector) and the present paper.
13 The author acknowledges Bernard Burtschy for his help and suggestions, Ludovic Lebart for his comments,
Isabelle Bloch for her advices, Laurent Gille and Claire Charbit for their encouragements.
JEL Code/Keywords
EC 1.3
STATUS AND DYNAMICS OF VIENNESE B2C ECOMMERCE COMPANIES
Author: Michael Latzer, Stefan Schmitz, Natascha Just,
ICE-Austrian Academy of Sciences, Austria
During the last two years the number of empirical studies of B2C eCommerce increased. Most
of the studies are based on nationwide US-data with regional aspects being mostly neglected.
The neglect is largely based on the assumption that B2C eCommerce is a ubiquitous
phenomenon leading to deterritorialization. In our study we focus on the status and dynamics
of B2C eCommerce companies in Vienna in order to assess the importance of regional context
in B2C eCommerce. Furthermore, we analyze widespread hypotheses on disintermediation,
market transparency and market structure in the sector.
In January and February 2001 we conducted an in-depth-survey among 58 B2C eCommerce
companies in Vienna. We generated data on company characteristics (e.g. number of
customers, pure online vs. multichannel company), company strategies (e.g. disintermediation,
marketing, outsourcing, cross-promotion, customer acquisition costs, pricing strategy) and the
role of deterritorialisation as well as regional economic and technology policy. In February
2002 we circulated a second short questionnaire to gather data on success factors and revenue
growth in 2001. This paper presents the most interesting results concerning the status and
dynamics of Viennese B2C eCommerce companies in 2001/2. We supplement the descriptive
statistics with statistical tests and relate them to econometric analysis.
In section 1 we present the outline of the paper and formulate the underlying research
hypotheses. In section 2 we provide the details of the two surveys and the sample selection
process. Section 3 focuses on the status of B2C eCommerce in Vienna, on the relation between
virtual and physical presence and on regional advantage. We find evidence of synergies
between virtual and physical activities of B2C eCommerce companies. Further important B2C
eCommerce success factors are regional infrastructure in the areas of ICT (information and
communication technology) and logistics as well as regional market size. In section 4 we
discuss the implications of our results concerning disintermediation, market transparency and
success factors on the “Threatened Intermediaries Hypothesis” and on market structure.
Contrary to widely held views the evidence shows that disintermediation is not a widespread
phenomenon in B2C eCommerce. The data reveal that market transparency and the intensity of
competition in B2C eCommerce are lower than expected. Endogenous sunk costs play a major
role in shaping B2C eCommerce markets. In section 5 we analyze the expectations and the
realizations of the growth rates of B2C eCommerce revenue in 2001. We find that Viennese
B2C eCommerce accurately estimated their revenue growth rates in 2001, despite the
worsening conditions of B2C eCommerce worldwide. Section 6 concludes
EC 1.4
THE EMERGENCE OF M-BUSINESS : AN ANALYSIS OF THE CASE OF THE FRENCH MARKET
Author: Pierre Vialle, Institut National des Telecommunications, France
Mobile Internet and M-business applications have been presented as a promising opportunity
for suppliers of equipment and services, as well as for business users. In Europe, the presence
of a common GSM standard and the high penetration rates achieved in most countries, raised
the expectation that Europe could reach a leader position, in contrast to its backward position
in Internet business compared to the U.S.A. In this paper, we analyse the emergence of mbusiness and its perspectives from a realistic point of view, from the case of the French market.
We first present the specificity of the French Information and Communications market and
industry. Second, we analyse the present and future technological and service environment, the
present market situation and customer expectations, as well as possible future market
development. Third, we analyse the strategies of suppliers and the emergence of a m-business
value chain, with a particular focus on co-operation and competition between complementary
actors. Finally, we conclude by discussing the relevance of m-business opportunities from a
business user perspective.
JEL Code/Keywords:
Keywords: m-business, m-commerce, wireless Internet, mobile Internet, GSM, GPRS, UMTS,
e-commerce, innovation, co-operation, networks.
PPI PUBLIC POLICY ISSUES: CHAIR MR. CHEN
DISCUSSANT: MS VAGLIASM
PPI 1.1
SUBSIDIZED RURAL TELEPHONY AND THE PUBLIC INTEREST: A CASE STUDY IN COOPERATIVE
FEDERALISM AND ITS PITFALLS
Author: Jim Chen, University of Minnesota Law School, USA
Even as the Supreme Court has directed the devolution of regulatory power from the federal
government to the states, Congress and the FCC have infused a new set of regulatory duties and goals
into telecommunications law. These devolutionary and deregulatory agendas, however, are
fundamentally incompatible. Devolution does not destroy regulatory power; it merely diverts it, often
in distorted form, from federal to state government. The usual defenses of federalism – substantive
diversity, administrative efficiency, and enhanced political participation – behave perversely in an
industry marked by convergence, interoperatibility, and network efficiencies. “Cooperative
federalism” in telecommunications, at least insofar as it purports to promote deregulation, is a policy
at war with itself.
I shall test the coherence of cooperative federalism in the administration of the federal Universal
Service Fund (USF). The Telecommunications Act of 1996 directs state regulatory commissions to
determine carriers’ eligibility for universal service support in rural and high-cost areas. Universal
service combines one of the objectives of traditional public utility law with the deregulatory
orientation of the 1996 Act. By requiring state commissions to determine whether the presence of
multiple eligible telecommunications carriers (ETCs) in rural markets advances the public interest,
section 214(e)(1) of the Act invites the states to exercise independent (albeit not unconstrained)
judgment. High-cost support under the USF therefore represents a prime instance of cooperative
federalism.
The high-cost program shows that delegation to state regulators has almost systematically invited
incumbent protection. State regulators frequently succumb to the temptation to discriminate based on
a carrier's incumbent status or its technological platform. Controversies over "local usage," “wireline
equivalence,” carrier-of-last-resort obligations, and advertising demonstrate the states’ propensity to
burden competitive carriers. The states routinely fail to recognize crucial elements of the public
interest, especially competitive neutrality, technological neutrality, consumer choice, and rural/urban
parity. Worse, they treat the purported impact of additional ETC designations on the solvency of the
USF as a pretext for denying eligibility for funding to competitive carriers. Although a forwardlooking universal service financing mechanism, in lieu of the FCC's existing embedded-cost approach,
would facilitate the full portability of support between incumbent and competitive carriers, neither the
FCC nor the states appear prepared to adopt that solution. State-law recalcitrance within the high-cost
program is so extreme that aggressive preemption will be required to restore equal legal footing to
wireline incumbents and wireless competitive carriers.
Deregulation contains its own technology policy, and a successful one at that. The public interest in
subsidizing rural telephony rests in the aggressive roll-out of advanced telecommunications
infrastructure to the nation’s geographic and economic limits. State administration has failed to honor
competitive neutrality, portability of support, and parity between rural and urban Americans. The
result – reflexive opposition to competitive entry in rural telecommunications market – represents the
antithesis of the 1996 Act. In short, decentralization translates, jot for jot, into massive resistance
against deregulation.
PPI 1.2.
ASSESSING MARKET FAILURES IN ADVANCED TELECOMMUNICATION
SERVICES: UNIVERSAL SERVICE CATEGORIES
Authors: José Luis Gómez Barroso: Universidad Nacional de Educación a Distancia, Spain
Jorge Pérez Martínez: Universidad Politécnica de Madrid, Spain
The universal service in telecommunications is almost unanimously considered as a dynamic
concept. The debate over its extension, which shall therefore have a permanent validity, requires its
base to be more solid than the one that supports many of the usual positions, which are frequently
mere declarations of wishes.
Any opinion regarding the opportunity and magnitude of the extension should be based on a prior
analysis of the possible presence of market failures in advanced telecommunications services
(categorization as public or merit goods, externalities, market situation, effect on economic
development and equity). Strictly speaking, only the existence of market failures can justify public
intervention which, additionally, should be adjusted according to both the intensity with which such
motives appear, and which one is considered to be preponderant.
The catalogue of duly assessed and ordered market failures, represents at that point a solid
foundation from which to defend each political position or opinion added to the debate. Since the
interpretation of its significance (and even of its existence) is far from being uniform, the resulting
patterns of action are disparate. Proceeding accordingly with this criterion, the different
interpretations on the significance of the market failures give place to four basic positions: not
extending universal service, or doing it according to one of the three conceptions we call
“correcting”, “driving” and “vertebrating” universal service.
– The first of them rejects public intervention since it considers either there are no market
failures, either their resolution would bring on more costs than benefits.
– The second considers that advanced telecommunication services are more tan just a simple
consumer good and, thus, it would be necessary to act in the areas where it is apparent it will
take too long for the market, main responsible for their spreading, to arrive. Relatively long
wait periods until market activity is known and services that can be considered widespread
(thus deserving to be considered universal) are identified characterize this option.
– When telecommunications are considered to be a significant good from an economic, and
even social, point of view, intervention becomes more generous and compelling. However,
the ambition of the objectives cannot avoid the cost resulting from such an action. At a
second stage, the consequences of the possible measures taken on shall have to be examined
should the financing be taken from the companies in that industry or, should the cost be
publicly faced, “budgetary realism” would probably impose the resource to public election
criteria.
– The cost of providing the universal service is no longer the first consideration when the new
services are considered to be a “basic social good”. In this case, equity criteria make it
necessary for an immediate and widespread extension of the universal service. As a basic
social priority, it can be placed alongside any of the remaining basic policies (healthcare,
education).
The existence of a widely accepted basic definition cannot hide the fact that universal service is a
complex concept subject to strong disagreements. Its apparent simplicity hides, on the contrary,
disparate interpretations that have not been adequately described. A first classification of universal
service was carried out from a practical perspective, bearing in mind network development stages.
The assessment of market failures leads to a more conceptual classification. Additionally, these
diverse categories of universal service provide a logical connection between the theoretical opinion
and the practical scope, linking to each interpretation the set of measures to be promoted, should
they be consistent.
Main references
Bar, F. and Munk Riis, A. (1997). "From welfare to innovation: toward a new rationale for universal service",
Communications & Stratégies, 26, 185-206.
Bergman, L.; Doyle, C.; Gual, J.; Hultkrantz, L.; Neven, D.; Röller, L.H. and Waverman, R. (1998). Europe's network
industries: conflicting priorities. Telecommunications: monitoring European deregulation 1. Centre for
Economic Policy Research, London.
Faulhaber, G.R. (1997). "Public policy for a networked nation", The University of Florida Journal of Law and Public
Policy, 8, 219-242.
Forestier, E.; Grace, J. and Kenny, C. (2002). "Can information and communication technologies be pro-poor?",
Telecommunications Policy, 26(11), 623-646.
Graham, J., Cornford, J. and Marvin, S. (1996). "The socio-economic benefits of a universal service telephone network.
A demand-side view of universal service", Telecommunications Policy, 20(1), 3-10.
Langtry, B. (1998). "The delivery of universal service: exploring ethical motivation" in Langtry, B., editor, All
Connected: Universal service in telecommunications, 119-134. Melbourne University Press, Melbourne.
Stiglitz, J. E. (1988). Economics of the public sector. W.W. Norton & Company, New York.
JEL Code/Keywords:
JEL Codes:L 96, L 98, H 54, D 70
Keywords: universal service, market failures, advanced telecommunication services, incomplete
markets, merit goods, equity
PPI 1.3
REGULATION AND INTERNET USE IN DEVELOPING COUNTRIES
Author: Scott Wallsten, Brookings, USA (papaer to be presented by the discussant)
Concerns about a worsening “digital divide” between rich and poor countries parallel the hope
that information and computing technologies (ICTs) could increase economic growth in
developing countries. Little research, however, has explored ICT growth beyond nothing that it
is correlated with standard developmwent indicators, and no empirical research has explored
the role of regulation. I use data from a unique new survey of telecommunications
infrastructure development, ubiquity of personal computers, and time trends, I find that
countries requiring formal regulatory approval for Internet Service Providers (ISPs) to operate
have fewer Internet users and hosts than countries that do not require such approval. Moreover,
countries that regulate ISP final-user have higher Internet access prices than countries withour
such regulations. These results suggest that developing countries’ own regulatory policies can
have large impacts on the digital divide.
JEL Code/Keywords:
JEL Codes O1, O3, L5, L96
Keywords Regulation, Internet, Telecommunications, Developing Countries
I thank Rosario Kaneshiro for excellent research assistance. I am grateful for helpful comments from George
Clarke and Greg Rosston. I am of course responsible for all erros and options. The findings, interpretations, and
conclusions expressed in this paper are entirely those of the author and do not necessarily represent the views of
the World Bank, its Executive Directors, or the countries they represent.
PAPERS NOT TO BE PRESENTED:
CITIES, ELECTRONIC COMMERCE, AND LOCAL POLICIES
Author: Gerhard Fuchs, Center for Technology Assessment, Germany
Hardly any other internet related application has attracted such a wide attention like the
buzzword Electronic Commerce. In spite of the downfall of the „New Economy“ Electroni
Commerce and Electronic Business are still on virtually everybody’s mind. These constitute
fancy marketing concepts for software as well as IT hardware companies. Visionary concepts
of future data processing, trade, innovative applications in marketing, procurement, sales, in
human resources development, training are linked to these concepts. Electronic Commerce still
looks like a growing billion $ market for the crisis ridden IT and telecommunications industry.
Not only companies are concerned about Electronic Commerce, but also politicians, economic
development actors, for some of them it is becoming a central field of action. This is also true
for local and regional economic development agencies.
This paper analyses options that regional intermediary actors in the field of Electronic Commerce –
focussing on the business-to-business sector – have at hand or use to promote Electronic Commerce.
Empirically the situation is examined in three different regions of the state of North Rhine
Westphalia in the west of Germany (Aachen, Dortmund and Bielefeld) and three region in the
southern state of Baden-Württemberg (Ost-Württemberg, Karlsruhe and Mannheim). Specific
supportive strategies are analysed in detail in these regions on the basis of extensive questioning and
secondary analyses. Experts from institutions for the promotion of the economy, from chambers of
commerce as well as chambers of artisans on the one hand and selected managers responsible for
decision making within enterprises of the goods production and information economy on the other
hand are in the centre of attention. A result of this analysis has been the development of a typology
which allows us to distinguish between different types of activities and promotion strategies
NSA NEW SERVICE APPLICATIONS. CHAIR MR TSUJI
NSA 1.1
WHAT ARE THE LESSON’S FROM JAPAN’S MOBILE INTERNET SUCCESS STORY?
IMPLICATIONS FROM A COMPARATIVE STUDY
Authors: Erik Bohlin, Sven Lindmark, Chalmers University of Technology, Sweden
The paper presents European policy implications for future advanced mobile networks,
building on findings that include an overview of the Japanese success factors in mobile
Internet. The main lesson is that there is a need to develop a more explicit European industrial
policy for 3G, taking into account the need to sustain new initiatives and to enable
complementary infrastructures, such as for electronic payments.
The Japanese experience with i-mode suggests that the critical success factors revolved around
sufficient size for the dominant actor to take risky steps in getting the new market started, and
on “non-monopolistic” payment schemes for new mobile Internet services. Without the size
and dominance of NTT DoCoMo, the new service platform, enabled by i-mode, would not
have been deemed credible by the market community. Moreover, the monopolistic temptation
of short-run profit maximization needed to be tempered by a more long-run service growth
orientation, as the DoCoMo payment scheme conveyed. (In this scheme, the new “official”
service provider keeps 91% of the service revenues, while DoCoMo takes 9% for
administration of billing, etc. “Unofficial” service providers are outside this arrangement but
generate traffic revenues for DoCoMo.)
The European market-place, with its multitude of market players and license conditions, will
need to be supported by increased policy and regulatory coordination, in order to develop a
similarly credible institutional framework as in Japan, and urgent steps to facilitate efficient
service platforms such as a micro-payment structure need to be taken.
MOST RELEVANT BIBLIOGRAPHY ITEMS
Bohlin, E. (1998) “Digitization and Strategic Opportunities – On the Roots to the NTT Divestiture
Debate”, Keio Communications Review, No. 20, 1998.
Bohlin, E., (2001) “The European 3G Paradox”, info, Vol. 3, No. 6, pp. 451-457.
EC/JRC/IPTS/ESTO project “3GE: Prospects for the third generation mobile systems”. see www.jrc.es.
Fransman, M. (2002) Telecoms in the Internet Age: From boom to bust to ?, Oxford University Press,
Oxford.
Funk, F. (2001) The Mobile Internet: How Japan Dialed Up and the West Disconnected, ISI
Publications, Hong Kong.
Lindmark, S. (2002) The Evolution of Techno-Economic Systems – An Investigation of the History of
Mobile Communication, Doctoral Thesis, Dept. of Industrial Management and Economics, Chalmers
University of Technology, Göteborg, Sweden.
JEL Code/Keywords:
JEL Codes: L96, O31, N8
Keywords: mobile Internet, i-mode, NTT DoCoMo, 3G, industrial policy, coordination,
standardization, competition, innovation
NSA 1.2
AN ANALYSIS OF THE JAPANESE TELECOMMUNICATIONS MARKET IN
TRANSITION - FOCUS ON VOICE OVER IP
Author: Masatsugu Tsuji, Osaka University, Japan
Accompanying recent technological development, industrial transformation has been taking
place in the Japanese telecommunications market. Such transformation is summarized as: (a)
shifting from fixed to mobile telephone; (b) broadband; and (c) voice over IP (Internet
telephony). In Japan, the number of mobile telephone subscribers has already exceeded that of
fixed telephones, and the number of Internet users is now the second largest in the world,
following the U.S. Above all, broadband access such as DSL (Digital Subscriber Line) has
recently shown a remarkable increase, and DSL representing subscribers are more than 5
million, and with Japan taking the lead in FTTH in the world.
The current framework of the Japanese telecommunications market was established base3d
on the 1996 Telecommunications Act of the U.S. which was aimed to introduce new entrants in
the monopolistic market through such unbundling network elements, line sharing, and
interconnection charges calculated from on LRIC (Long-run Incremental Cost). The
transformations mentioned above have been changing the existing telecommunications market
by giving rise to issues such as eliminating the difference between telecommunications carriers
of the first and second category, sharing the costs of NTT locals’ subscribers’ lines by Internet
Access such as DSL, and destroying the framework of the interconnection charges.
This paper attempts to analyze the transformation of the Japanese telecommunications
market and the policy scheme in the age of ubiquity and broadband by focusing on Internet
telephony. Especially, we focus on the speed of its diffusion and its effect on the voice service
of the telecommunications market. In summer 2003, Internet telephony will be assigned a
telephone number, which will enable access from fixed telephones. This is expected to
promote the number of subscribers, since its charges do not depend upon communication time
and distance. Thus, the sharp decrease in traffic of fixed telephones is inevitable. This will
leads to a decrease in sales of current carriers such as NTT locals. Thus, NTT locals will be
unable to maintain their local networks any longer. This gives rise to the following two issues:
(a) interconnection charges; and (b) provision of universal service. The current interconnection
charges is based on presumptions such as increase in traffic. NTT locals have stopped
investing in new facilities related to exchange. Thus, a new scheme for interconnection
charges will be required. Regarding universal service, NTT locals cannot afford to make
provision for it. This also makes it necessary to have a new framework similar to that of the U.
S. This paper attempts to provide solutions to these issues.
NSA 1.3
HUMAN CONSTRAINTS FOR MOBILE COMMUNICATION
Author: Dr. Jari Veijalainen, Waseda University, Japan
Pasi Tyrväinen, University of Jyvaskyla, Finland
Expensive mobile communication equipment were used first for professional purposes, but
consumers have fast followed business users in adopting mobile telephones, hand-held
computers, and PDA equipment to daily use.
The number of digital handsets currently exceeds already one billion in the world.
Borderlines between a laptop and mobile telecom terminal, as well as other gadgets,
such as game consols, radio receivers, and TV sets are vanishing due to the miniturisation and
digital convergence of information processing and communication technologies. At the
communication side, extensive use of IP protocol in all device categories and within the core
network is a paramount example.
The digital convergence has also mixed the usage patterns of voice telephone,
datacommunication, and computer equipment making it harder for the operators to estimate
the future use of communication capacity. This estimation task has to take into account the
time users are villing to spend on communicating as well as the communication needs of the
users. However, the communication needs cannot be analyzed solely based on the amount of
data communicated.
This paper elaborates the estimation task by combining and analysing research from the
following five viewpoints. FIrst, the amount of information produced and used globaly as
estimated by the project "How much information" at Berkeley. Secondly, measurements of
organizational communication based on genre analysis reported in recent case studies give
an base-line for the average amount of communication an employee communicates per day
related to his/her assignments. Further this communication is divided into verbal
communication, communication using equipments to mediate interactive communicaiton, and
communication using paper or stored digital artefacts, such as digital documents or information
systems. Third, previous research comparing organizational use and individual consumer use
of communication technology. Fourth, cost models for communication capacity use and their
key findings based on time users are villing to spend on communicating. And finaly, limits of
human information processing from cognitive viewpoint.
These five viewpoint are combined by analyzing their results with respect to interactive
mediated communicaiton of humans limited mostly by time spent by users and communicaiton
using digital artefacts constrained mainly by data communication capacity. Further
development is analyzed with respect of change of communication practices of organizations,
emergence of band-with intensive applications requiring high QoS and other emerging trends.
MSI MOBILE SERVICES AND 3G POLICY ISSUES I: CHAIR: MR HAUCAP
DISCUSSANT: MR MÖLLERYD, MS VANBERG
MSI 1.1
THE ECONOMICS OF MOBILE TELEPHONE REGULATION
Author: Justus Haucap, University of the Federal Armed Forces Hamburg, Germany
This paper analyzes how competition works in mobile telecommuncations markets and, bases
on this analysis, we discuss whether regulatory intervention in mobile telephone markets is
justified from an economic perspective. Starting point of our analysis is the observation that an
evaluation of regulatory interventions into mobile telecommunications markets cannot be made
without a deeper understanding for competitive processes in mobile telephony.
What is of decisive relevance for understanding competition in mobile telephony, is the
fact that building a mobile telephone network requires highly specific investments, which take
place under significant uncertainty, as investments in 3G networks such as UMTS illustrate.
An inevitable consequence of specific investments are sunk costs. Hence, one can only expect
firms to extensively invest and innovate if firms can hold a justified expectation to work
profitably after they have invested. To cover their capital costs, which are largely fixed and not
avoidable, firms need to follow a pricing policy that involves prices above incremental costs.
Hence, a key determinant for mobile operators' price policy lies in their cost structure,
which is characterized by high fixed and common costs that are also sunk and relatively low
incremental costs. In such situations, efficiency demands so-called Ramsey pricing structures,
which involves different mark-ups for different services. In contrast, a situation with uniform
mark-ups will generally be inefficient. Instead, services with an inelastic demand should carry
relatively high prices, while services, for which the demand is rather elastic, should be priced
close to marginal costs. Exactly such a pricing structure results when unregualted firms are left
to maximize their profits. Hence, the factor that prices and mark-ups differ between different
services and markets is an efficiency imperative and not a sign for market failure.
Nevertheless the necessity of interconnection and fixed-to-mobile termination may give
rise to competition problems. As we argue in this paper, closer analysis shows that these
problems do not automatically imply that sector specific regulation is warranted. The same
hold for the question of regulated mobile number portability.
Instead, an ex post introduction of sector specific reguation can be regarded as a brech
of the implict regulatory contract by the State. This Government hold-up socializes and
redistributes operators' profits, while the operators carried the initial investment risk. Such a
Government hold-up reduces firms' incentives for investment and innovation and, thereby, also
harms consumers in the long run. In addtion, there is a real risk of regulatory failure, as
empirical evidence demonstrates.
Based on these considerations, this paper fiercely advises against sector specific
regulation of mobile telephone markets. The social welfare loss that would arise from such
regulations are estimated to be enormous.
JEL Code/Keywords:
JEL Codes: K21, L13, L51, L96
Keywords: Mobile telephony, Competition, Regulation, Interconnection, Call Termination,
Number Portability, Roaming
MSI 1.2
THE IMPACT OF INDUSTRY STRUCTURE AND PRODUCT ARCHITECTURE ON THE SUCCESS OF
MOBILE DATA SERVICES: A COMPARISON BETWEEN EUROPEAN AND ASIAN MOBILE
MARKETS
Authors: Jarkko Vesa, Helsinki School of Economics, Finland
There is propably not a single person involved in mobile business who has not been wondering
about the reasons behind the success of NTT DoCoMo's i-mode service as compared to the
limited use of mobile data services in Europe. As our earlier analysis of NTT DoCoMo's
business model and success factors demonstrates (Saarinen et al., 2002) the Japanese mobile
data services business model appears to be much more comprehensive that what we are used to
here in Europe. In Japan, mobile operators control the network, the terminal sales, and the
content offering. This gives them better possibilities to manage the total user experience, to
offer clear technology and service roadmaps, and to develop the business with a longer
perspective.
In this paper we will look more closely into differences between the successful mobile data
services markets in Japan, and the not-so-successful European mobile data services in order to
better understand the key characteristics of each. Our analysis indicates that these two markets
have very different characteristics in terms of industry structure (vertical vs. horizontal) and in
terms of product architecture (integrated vs. modular). We have analysed in detail the reasons
behind these differences - and the implications of these differences on consumers, on mobile
operators, and on the mobile internet services markets as a whole.
The main contribution of this paper is to highlight the importance of the mobile business
ecosystem for the development of new mobile data services. In this paper we will introduce a
descriptive tool-kit for gaining a better understanding what is the current status and the likely
next development phase in various markets. Implications are drawn for future research on
structural differences between mobile data services in various markets. We will also discuss
the concept of supply chain for services. 
JEL Code/Keywords:
Keywords mobile data services, industry structure, product architecture
MSI 1.3
THE EFFECT OF SWITCHING BARRIERS ON CUSTOMER RETENTION IN KOREAN
MOBILE TELECOMMUNICATION SERVICES
Authors: Moon-Koo Kim*, Korea, Jong-Hyun Park,
Electronics and Telecommunication Research Institute, Korea
Myeong-Cheol Park**, Information and Communication University, Korea
This paper aims to investigate the influence of the interaction between customer satisfaction
and switching barriers on customer retention in mobile telecommunication services. The
detailed factors regarding switching barriers are classified based on the related literatures.
Furthermore, the hierarchical regression analysis is used to analyze the extent to which the
factors affect customer retention. The results are as follows: First, among the factors of
switching barriers, switching costs, such as continuity cost and contractual cost, interpersonal
relationship, and attractiveness of alternatives are key factors in determining customer
retention. Second, continuity cost and interpersonal relationship have an adjustment effect
between customer satisfaction and customer retention. The findings can help the mobile
operators establish a customer-oriented strategy by identifying a few key factors strengthening
the linkage with customers.
PAPERS NOT TO BE PRESENTED:
DETERMINANTS FOR MAPPING THE WIRELESS MOBILE MARKETS
Author: Vaida Kadyte, Åbo Akademi University, Finland
The presence of the telecommunication networks revolution and popularity of mobile
computing devices such as mobile phones is promising the astonishing growth in the number,
types and novelty of mobile applications and services for end-users. This work provides a
comprehensive market evaluation methodology that businesses can use to assess the mobile
cellular communication market readiness and potential. International nongovernmental
organisations have been collecting a relevant data for decades in order to facilitate the
transparent and rapid development of a new economy. Even though this data is available, very
few businesses have been able to realize the actual information value out of the flux and
perform the right investment decisions. Using a Self-organising Map (SOM) technology, the
paper is intended to provide a worldwide picture of overall composition of mobile market and
facilitate a gap analysis between undeveloped and industrialised countries. A wide set of social
and macroeconomic data was used to perform worldwide market analysis of the wireless
mobile telecommunication industry. Key enables of mobile markets, such as mobile
communication technology infrastructure and access, income per capita, literacy rate and
business environment are identified as weighting factors to aid in assessing mobile market
readiness. The Kohonen’s SOM network aims to perform cluster analysis in mobile
telecommunication markets worldwide according to the readiness and potential determinants
altogether, therefore paves the way for further research beyond traditional statistical
techniques.
JEL Code/Keywords:
Keywords: wireless mobile telecommunication markets, readiness and potential, Selforganising Map
SP SPECTRUM POLICY: CHAIR MR. NETT
SP 1.1
SPECTRUM TRADING IN GERMANY, AUSTRIA AND THE UK: THE INFLUENCE
OF REGULATORY REGIMES AND EVALUATION OF CRITERIA ON
COMPETITION IN THE EUROPEAN MOBILE TELECOMMUNICATION SECTOR
Author: Ewald Lichtenberger14, Wollf Theiss & Partner, Austria
Spectrum is one of the most important and valuable assets of mobile telecommunications
operators. According to the options provided in the European Directives, national legislative
bodies are in the process of defining the regulatory framework for spectrum trading. While the
details of the individual regulations in the various member states may differ, spectrum trading
will, in any case, confront operators with a new challenge encompassing potential competition,
complexity, risks and opportunities.
In Germany, a first draft of the new law has been presented for public discussion. In Austria,
after a discussion process last year, the new law was supposed to be enacted before the summer
of 2003. In the United Kingdom, a draft communication bill is subject to broad and intense
discussion. Despite the fact that all concepts are based on the European framework, when
analysed in detail, the differences among the various countries are significant. This paper
describes three national concepts, thereby showing the range of possibilities and considers the
competition law criteria that national regulatory authorities (NRA) might utilise when deciding
whether to approve individual transactions.
In section 1, after a general description of the regulatory framework as the basis for all national
laws, the competition criteria stipulated in and derivable from the European framework will be
analysed.
Section 2 will focus on the status of regulation in Germany. According to the current draft of
the new law, rights of frequency will be transferable with the prior consent of the NRA, who
sees to it that any transactions comply with competition law. Beforehand, the NRA may - after
a public discussion process - under certain conditions (e.g. improved efficiency and interest of
operators) declare specific frequency bands to be tradable and provide a framework for trade if
certain results are to be expected and the general goals of regulation are not endangered. The
paper will show how criteria specific to the sector and general competition law might be
utilised when individual frequency trading is subject to approval by the NRA.
In section 3, the concepts contained in the Austrian draft will be presented. When auctioning
new spectrum, the NRA may consider certain spectrum tradable. This provision might be
understood to mean that frequency trading is only possible for new spectrum. In fact, this has
been the main topic of discussion in Austria thus far. In case the NRA decides on an individual
transaction, the technical and competition-related effects must be taken into account for the
sake of preventing any distortion of competition law.
Section 4 describes the situation in the UK, according to the current discussion and draft
Communications Bill. The issue of frequency trading has been subject to broad discussions in
the UK since 1996. The study "Review of Radio Spectrum Management" arguments for
frequency trading under a regime keeping transaction costs low, with clear definitions for
rights of use and publicity. The Radio Communications Agency's "Strategy for the Future Use
of the Radio Spectrum in the UK 2002" delivers arguments for an adequate regulatory
framework for spectrum trading, taking into account that competition must not be distorted and
finding mechanisms for guaranteeing the occurrence of transactions without interference.
Section 5 develops possible scenarios and transactions in the three relevant markets and tries to
provide answers to how the NRA might apply the criteria to individual transactions.
Section 6 tries to answer the question of how different standards for frequency trading
regulation in the member states might influence competition in the three markets, especially
14
Partner, Wolf Theiss, Attorneys at Law, A-1010 Vienna, Schubertring 6
related to pan European operators and whether the regimes of frequency trading might
influence the European consolidation processes in mobile telecommunications markets.
SP 1.2
THE FIRST COMBINATORIAL SPECTRUM AUCTION
Author: Christian Koboldt, Dan Maldoom, Richard Marsden, Dotecon London, UK
In June 2002, Nigeria held a sealed bid combinatorial auction for regional fixed wireless
access (FWA) licences. This was the first time that combinatorial bidding has been used for
allocating radio spectrum. The choice of format was influenced by the outcome of an initial
application stage, with bidders submitting potentially binding applications at a reserve price,
which revealed information about the structure of bidder demand and inter-regional synergies.
The format also met the significant logistical constraints of running a spectrum allocation
procedure in Nigeria.
In this paper, we analyse the design, implementation and outcome of the allocation process.
We also draw some conclusions on the potential applications of sealed bid and
combinatorial format auctions. Some 67 of the 80 available licences were allocated, with
successful bids totalling 3.78 billion naira (38 million US dollars). The process was widely
praised within Nigeria for both its transparency and success in allocating licences.
SP 1.3
PROPERTY RIGHTS AND WIRELESS LICENSE VALUE
Author: Tom Hazlett, The Manhattan Institute, USA
The Economics of Broadband Regulation (lengthy analysis of unbundling regulation for
broadband; includes international comparison of BB pen rates, showing that highest BB
deployment occurs not where unbundling is most common but where technologies compete)
Cable TV Rate De-Regulation in the United States: The Saga Continues (following rate
deregulation in March 1999, real rate increases for cable TV systems have actually moderated
from the pattern seen in the 1993-99 period when rates were ostensibly rolled-back by 17%)
SP 1.4
THE ECONOMIES OF FREQUENCY TRADING
Authors: Ulrich Stumpf, Lorenz Nett, WIK GmbH, Germany
Radio frequencies are an essential and scarce input for electronic communications services.
National regulatory frameworks, in particular, should ensure that frequencies are allocated to
their most efficient uses and that spectrum allocation fosters competition. Traditionally the
focus of spectrum management is on the primary allocation of frequencies (using beauty
contests and/or auctions). So far, national regulatory frameworks in the European Union do not
provide for spectrum trading, and secondary markets for rights of use spectrum do not exist.
The resulting problem with the traditional approach clearly is its lack of flexibility in
reallocating spectrum. Technologies and markets change and the primary allocation of
spectrum may become largely inefficient. The difficulty in reallocating rights to use spectrum
may also prevent market expansion or new entry of competitors and thereby lesson
competition.
According to a recent FCC Report, three technological trends are of major importance: (i) The
development of spread spectrum technology has increased the demand for contiguous
broadband spectrum allocation. (ii) Technology is making increased use of higher frequencies,
e.g., of bands above 50 GHz that previously were considered to have limited utility. (iii) The
development of frequency-agile technology creates a potential for services and uses that are not
tied to specific frequency bands.
These technological developments increase the scope for efficiency improvements through
flexible re-allocation of rights to use spectrum. With spectrum trading, rights to use spectrum
could move more easily from low-value uses to high-value uses and scarcity of spectrum for
specific applications would be alleviated. The full potential of spectrum trading, however,
would only become apparent if at the same time frequency user plans were rendered more
flexible.
The new EU regulatory framework for the electronic communications sector has acknowledged
the current lack of flexibility in spectrum (re)allocation and explicitly provides for the
possibility of spectrum trading. The Framework Directive explicitly allows Member States to
make provisions for undertakings to transfer rights to use frequencies to other undertakings. A
number of Member States such as Germany France, Spain and the UK are currently debating
the introduction of spectrum trading or have already drafted new legislation that that provides
for spectrum trading.
This paper distinguishes spectrum trading from administrative spectrum reallocation by two
characteristics: (i) It is the current holder of a right to use spectrum that initiates its transfer to
another firm. And (ii) the price achieved for the transfer is (at least partially) retained by the
original holder of the right. The paper highlights the case for introducing spectrum trading in
the EU and, more specifically, discusses institutional arrangements for spectrum trading that
meet the goals of moving spectrum rights to the most efficient users, foster competition on
end-user markets for electronic communication services, and is transparent, objective and nondiscriminatory.
In more detail the paper deals with the following issues: First, we briefly sketch the new EU
regulatory framework for spectrum trading. In the following section, we examine the guiding
principles for frequency management (e.g. to promote an efficient usage of spectrum, create
incentives to invest and innovate, to ensure competition, to be non-discriminatory, objective
and transparent, practicability of the system, be in line with international obligations, set aside
spectrum for public safety and defence, to pursue government public policy goals such as
cultural diversity). In the subsequent section, we provide an economic analysis of major issues
related to frequency trading such as efficiency of spectrum use, internalisation of external
effects, how to pursue public policy goals, frequency trading providing an incentive to give up
hoarding, measures to ensure the intensity of competition, how to deal with windfall profits,
big-bang auctions as a proactive approach to introduce frequency trading and retrospective
introduction of spectrum trading. Afterwards, we discuss various aspects of institutional
arrangements that may govern spectrum trading under the new EU regulatory framework.
Alternatives include (i) an arrangement, where trading is governed by individual transactions
between undertakings only subject to general regulatory principles, (ii) an arrangement, where
trading is performed under the close supervision of, and on the basis of a trading platform run
by, the National Regulatory Authority (NRA), and (iii) other alternatives between these polar
cases. The scope of frequency trading is addressed in what follows. We analyse the incentive to
trade depending on the initial assignment procedure (e.g. beauty contest, auctions, first-come
first-served, lotteries) as well as the frequency fee (e.g. fees which cover administrative cost,
economic incentive pricing as the guiding principle for the calculation of the fees). In the
subsequent section we focus on the most relevant aspects of an institutional arrangement, on
the question of a step-by-step versus simultaneous introduction, and a discussion of additional
elements. Finally, we end up with a conclusion.
JEL Code/Keywords:
JEL Classification code D4, D61, H2, K2, L51, L96
Keywords Telecommunications, regulatory policy,
mechanisms
frequency
management,
market
RA Regulating Access: chair Mr.Kiedrowski
discussant: Mr. Merdian
RA 1.1
LOCAL LOOP UNBUNDLING A FAILED MODEL FOR LOCAL COMPETITION?
THE GERMAN EXPERIENCE
Authors: Bernhard Kallen, Ralph-Georg Woehrl, Deutsche Telekom AG, Germany
Some EU officials state that local loop unbundling has failed to foster competition in order to
increase consumers choice at affordable price levels. It is claimed that ULL had an neglectible
effect on market outcome neither for voice services nor for DSL services. Therefore, the EU
Commission calls for additional regulated wholesale services that should be offered by the
incumbents. For the PSTN, a set of access services and interconnection obligations were
established. Equally, broadband platforms of incumbent operators must be made accessible to
competitors by so-called bitstream access.
In sharp contrast to the latest developments on the EU level, on 20th February 2003, the FCC
announced a subsequent relief / phasing-out of UNE-P obligations for local incumbents
(ILECs) . E.g., ILEC’s obligation to offer line sharing will end three years after the decision.
The FCC argued that any network access at cost-based prices unfolds two effects: In the short
run, competition on retail markets may intensify. In the long run, however, cost-based prices
on the wholesale level erode any incentive to invest in infrastructure. As a consequence,
innovations on the network level as well as adequate replacement of depreciated network
elements are negatively affected.
Does the EU lag behind the US or are there specific reasons that justify different solutions for
the same problem? To answer this question, a look on the German experience 5 years after full
liberalization gives valuable insights: Different from the rest of Europe, ULL is a success story
in Germany with more than 1 million unbundled lines in service. - for DSL as well as for
POTS!
We examine two recent examples of mandatory upstream services at cost-based prices in
Germany, carrier selection at the local level and broadband (bitstream) access. In both cases,
the wholesale obligation will predictably disturb the market outcome. Some business models
will perish, while some new will arise. Presumably, however, only the current models include
sufficient investment in infrastructure to ensure sustainable competition. FCC’s conclusions are
therefore applicable symmetrically.
We then ask about the optimal regulatory policy, regarding especially the evolution of a
regulated market. To this aim, we examine the model of phasing out regulation in the long run.
In particular: What will be the market outcome after a period of strict obligations for access
and interconnection at cost-based prices? And, when this outcome is supposed to be
unsatisfactory, which obligation is more harmful: The provision of certain wholesale services
or the prescription of cost-based prices or a combination of both?
RA 1.2
THE LOCAL ACCESS PROBLEM OF TELECOM MARGINAL CONSUMERS
Authors: Paul F. Phumpiu and Tania Bergazo, Osiptel, Peru
It is close to ten years since Peru privatized its telecommuncations industry. Significant
improvements in the provision of telecom services and the introduction of new technologies in
the industry has ocurred. These improvements have increased teledensity figures, improve the
quality of service, lower the level of tariffs, increase the variety of services offered, open new
markets, and increase the amount invested in telecom infraestructure, and, all of these changes
are happening under an increasing level of competition. Universal access to local
telecommunication services, however, is lagging behind (stagnant) and not meeting previously
thought expectations.
In this paper we provide an explanation as to why, in Peru, is the market expansion for local
telephone services reaching a stagnant situation, even though only close to 7% of the
population has residential access to local fixed telephony. Even, if we include access to public
phones, there are close to 1500 rural towns/communities which do not have access to telecom
services. The local access problem to telecom services is not only in rural towns, they also
happen in more developed areas. Lima State, where the country capital is located and where
close to one third of the total country population lives (about 25million people), has less than
15% of teledensity for fixed local telephony. Thus, an important percentage of households in
Peru do not count with residential access to local telephony and in some areas they do not even
count with an in-town access to local public phones. These individuals are the telecom
marginal consumers, the ones that have been left out from the Peruvian telecommunications’
industry progress.
We consider that, the actual level of tariffs combined with the low-income levels of a
significant part of the population, only offers a minor explanation for the limits on the
expansion of local telephone services. We do not consider that these variables determine a
dead-end situation. We think that the existence of groups with low levels of income are not a
barrier to the expansion of local telephone services. And, as to the tariff level, they are
endogenously determined, and, if the organization of the industry changes, then, tariffs can also
change.
In this paper we argue that the present organization of industry is a policy result. Moreover, we
argue that improving the local access to telecom services for marginal consumers can radically
change if, there are changes in the organization of industry. And, industry organizational
changes can happen if, there is a policy to develop partnerships among different industry
agents (firms, users, and institutions). Partnerships can be achieved only under minor changes
in the present normative framework, but under more significant changes in the way we think.
This paper provides a conceptual framework to explain the observed organization of industry
for local telecom services and propose a way to significantly decrease the number of marginal
consumers through partnerships.
RA 1.3
THE DILEMMA OF BITSTREAM ACCESS
Author: Tom Kiedrowski, BT Group, UK
Within the context of wholesale broadband access, we are told that non-discriminatory
provision of bitstream access is essential to the development of competition particularly with
regard to ‘high-speed’ Internet in the EU. Bitstream access is defined as “the situation where
the incumbent installs a high-speed access link to the customer premises and then makes this
access link available to third parties, to enable them to provide high-speed services to
customers.” However, it is interesting to recall that over the past five years, European policy
makers have also said that mandating local loop unbundling and interconnecting leased lines
are essential to the development of competition in broadband access. Different types of
bitstream access are already available in some EU Member States. Where they services they
offered on very different terms. In other Member States bitstream access services are not
available at all, notably Germany. I present a paper that considers the desirability and
feasibility of mandating bitstream access within the European Union drawing on legal and
regulatory developments both at the EU and national levels are discussed, before a variety
options are outlined from economic and policy perspectives. The paper concludes with
recommendations for a bitstream access policy that that promotes investment and innovation as
well as competition between infrastructures.
RA 1.4
CAPACITY CHARGE AND PEAK-LOAD PRICING
Author: Joan Calzada, Universitat de Barcelona and PPRE, Spain
Several European telecommunications regulatory agencies have recently introduced a fixed
capacity charge for regulating the access to the incumbent’s network. This mechanism is
specially relevant if we consider the principal driver of network cost is the peak-hour capacity
cost and that firms generally use a peak-load pricing policy to efficiently manage their load
curve. The main purpose of this paper is to give a set of necessary conditions for the
determination of the optimal capacity charge under continuous and interdependent demand for
telecommunications services. We show that the optimal capacity charge and the access-minute
charge analysed by Armstarong, Doyle, and Vickers (1996) have a similar structure and imply
the same payment for the entrant. However, in the case of the optimal capacity charge the
marginal opportunity cost incurred by the incumbent reflects its loss of profit in all time
periods. The analysis of the optimal capacity charge is extended to the case where there is a
competitor with market power. In this case, the charge should be increased to avoid that the
entrant fixes a longer peak period that the optimal. Moreover, we show that this correction
induces an efficiant management of the load by increasing the entrant’s peak price. In a
multiproduct setting, the optimal capacity charge not necessarily implies an efficient use of the
network.
I would like to express my gratitude for their valuable comments on this work to Antón Costas, Francese Trillas,
Jorge Navas and specially Angel Hernando. Comments by the members of the Research Unit on Políticas Públicas
y Regulación Económica are gratefully acknowledged. The only responsibility of the errors remains my own.
JEL Code/Keywords:
JEL Codes: L13, L51, H54, D43
Keywords: Access Pricing, Capacity Charge, Peak-Load Pricing, Network Regulation
MSPII MOBILE SERVICES AND 3G POLICY ISSUES II: CHAIR MR.FREDEBEUL-KREIN
DISCUSSANT: MR: MÖLLERYD
MSPII 1.1
PROMOTING COMPETITION ON THE MARKET FOR MOBILE CALL TERMINATION:
A REVIEW OF REGULATORY APPROACHES IN THE LIGHT OF UPCOMING 3G NETWORKS
Author: Markus Fredebeul-Krein, DETECON International GmbH, Germany
Market data shows that in most mobile markets revenues from incoming call minutes become
an increasingly important source of revenue. As to these incoming calls, mobile termination
charges represent roughly two thirds of the costs of the originating operator and thus have a
direct effect on the retail price of calling a mobile phone. In most countries the calling party
pays for calls to mobile phones (CPP-principle). As a consequence mobile network operators
may have a low incentive to fix the charges for incoming calls to a competitive level. The
question therefore arises, whether there are any factors which may reduce the effects of the
CPP principle. If not some kind of regulatory intervention may become necessary. This paper
therefore examines whether there is a need for the regulation of fixed-mobile network charges
and, if yes, what is the appropriate regulatory tool to do so. Thereby the focus is on the analysis
of regulatory approaches in the light of upcoming 3G networks.
The paper is organised as follows: The first section analyses the intensity of competition in the
mobile voice call termination market by examining whether there are any relevant factors (e.g.
substitution possibilities) that constitute sufficient constraint on termination charges to mobile
phones to keep those charges at a competitive level. Thereby it will also be considered how
competitive constraints might develop in the future. It will be shown that neither existing
forces nor possible future developments put sufficient competitive pressure on mobile call
termination charges, which is why some kind of regulatory intervention may be necessary to
prevent anti-competitive behaviour in this market segment.
The second section will examine the appropriate form of regulatory intervention. Various types
of regulatory options can be applied, all of them having advantages and disadvantages: 1)
increasing competitive constraints on termination charges directly; 2) tying call termination
charges to competitively constrained charges for other services; and 3) directly controlling
termination charges. As to all of these options, various measures can be taken by a regulator to
increase competitive pressures on call termination.
The final section will consider the issue as to what extent a regulator has to take the
development of 3G into account when regulating 2G voice call termination. Thereby it will be
demonstrated that rigid regulatory rules on mobile call termination impose not only
burdensome constraints on the performance of mobile operators subject to regulation. Also,
they could deter innovation and investment by others into this rather new technology. The
major challenge for regulators is therefore to adopt a regulatory approach that does not hamper
the development of future markets.
MSPII 1.2
MOBILE NUMBER PORTABILITY
Authors: Justus Haucap: University of the Federal Armed Forces Hamburg, Germany
Stefan Buehler: University of Zurich, Switzerland
In many countries, telecommunications regulators are about to require cellular
telecommunications operators to offer so-called mobile number portability (MNP).
MNP implies that customers can keep their telephone number - including the prefixwhen switching from one provider of mobile telecommunications services to another. In the
absence of MNP, customers have to give up their number and must adopt a new number when
they switch operators. In the latter case, costumers have to bear the switching costs associated
with informing people about their new number, printing new business cards, missing valuable
calls from people that do not have the new number, etc. Based on these considerations,
regulatory authorities typically impose mandatory MNP so as to reduce customers' switching
costs, attempting to make mobile telecommunications more competitive (see, e.g., Reinke,
1998).
The intuitive notion that number portability enhances competition due to reduced
switching costs has formally been analyzed by Aoki and Small (1999), who examine whether
there is a positive welfare effect if implementing MNP is costly. They find that, if the
investment costs of implementing a MNP system are weighted against the benefits of more
intense competition between mobile operators, the overall welfare effect is ambiguous. In
related papers, Gans, King and Woodbridge (2001) and Haucap (2003) have focused on the
question of how to allocate the property rights in telephone numbers and the costs of
implementing number portability, respectively.
An important aspect that has largely been ignored in this debate is the fact that MNP
makes it more difficult for consumers to distinguish between different networks when placing a
call. In the absence of MNP, consumers can usually distinguish between different mobile
networks through the number prefix.
When MNP is introduced, however, the number prefix does not automatically indicate
the network assignment of a given number. As a result, if calling prices differ between
different networks, consumers may have difficulties to find out the price of placing a particular
call. The effects of consumer ignorance with respect to relevant prices have recently been
explored by Gans and King (2000) and Wright (2002). They show that mobile operators may
have incentives to increase their termination fees if consumers only take notice of average
retail prices when making their calling decisions. Furthermore, they suggest that MNP may
deteriorate the customers' price information, without formally working out the argument or
analyzing the trade offs associated with the introduction of MNP however.
The present paper aims to fill this gap by analyzing the following trade off associated
with the introduction of MNP. On the one hand, MNP reduces switching costs, thereby making
mobile markets more competitive. On the other hand, MNP deteriorates the customers'
information about the relevant prices. The welfare effects of introducing mandatory MNP
should therefore be expected to be ambiguous in general. We find that the introduction of
mandatory MNP is less likely to generate welfare gains (i) the closer substitutes mobile
networks are, and (ii) the larger the mass of users of the fixed network, respectively.
JEL Code/Keywords:
JEL Codes: K21, L13, L51, L96
Keywords: Mobile Number Portability, Regulation, Price Transparency
MSPII 1.3
INTRODUCING COMPETITION AND ITS WELFARE IMPLICATIONS IN KOREAN
MOBILE TELECOMMUNICATION SERVICES
Authors: Donghee Lee, Duk Hee Lee, Information and Communication University, Korea
This paper empirically examines how introducing competition in Korean mobile
telecommunication services has affected the social welfare by estimating consumer surplus and
producer surplus in economic concepts. The Korean mobile telecommunications market has
rapidly grown since 1997 when competition was introduced in the market. Nowadays mobile
telecommunications services in Korea seem to be a necessary good for doing business as well
as personal communications. In particular, with a continuous decrease in service price, both
consumers and service operators have realized tremendous welfare gains. However, it is not
clear how much the social welfare has been achieved due to introducing competition in Koran
mobile telecommunications services, especially in voice services.
Regarding the estimation on the social welfare change, first, we estimate consumer
surplus through estimating the price-elasticities of demand in mobile telecommunications
services. Secondly, using service providers’ financial reports such as the balance sheets and the
income statements we estimate the producer surplus considering opportunity costs for the
capital investments. Finally, we compare the patterns and amounts of the social welfare
between before and after introducing competition.
This study will provide some policy implications in regulating the mobile and even fixed
telecommunications industry at the aspect of social welfare. In addition, it may account for the
rationale behind service operators’ pricing behaviors facing the rapid growth of demand in the
social welfare perspectives.
MSPII 1.4
SMS INTERACTIVE TV: THE CONVERGENCE OF TELEVISION AND MOBILE NETWORKS
Authors: Petros Kavassalis, Michael Batikas, Atlantis Group, University of Crete, Greece
Simoni Eustathiou, Sylvia Panagiotou , Dpt of Economics, University of Crete, Greece
In the last months, European Television channels have started using SMS text messaging
service as a tool enabling users to interact with television programmes and broadcasters to
generate revenues from prenium-priced SMS services. Trade press’ papers report a nonnegligible success in the first steps of what is often called “SMS Interactive Television” with
MTV and RTL’s SMS/Teletext chat rooms, and BBC “Joy-of-Text” interactive program,
providing the best cases of success. With no doubt, the technological convergence of modes,
announced by Ithiel de Sola Pool several years ago15, in the beginning of the electronic
revolution, is the major force behind. But how this convergence is expected to happen and
what is about SMS messaging that has enabled the development of new interactive television
services. More generally, is this a realistic, maybe ad-hoc, development path for Interactive
Television after many years of rather unsuccessful trials to make broadcasting networks
interactive or converging with computers and the Internet? And how these developments will
affect the industrial development and the evolution of the industry structure in the fast-growing
mobile technologies and services industry?
This paper attempts to explore the precise way of convergence of Television and Mobile
Networks, surround the ongoing and future developments of SMS Interactive TV and craft an
intellectual framework, based on the Economics of Technical Change, which can contribute to
provide answers to all above questions. The paper spans over many technical, economic and
organizational issues to explore the various aspects of a new service that expands quickly
around the Televisions of the Globe and promises to become much richer in functionality with
the advent of MMS. It structures as follows.
In a first section, we explore the ground of the ongoing convergence between Television and
Mobile Networks in the light of the past history of interactive television, and explain the
technical challenge at issue. In Section 2, we flight over a number of successful cases of S]MS
interactive TV (RTL-teletext chat, MTV awards voting, Channel 4’s Big Brother and SMS
reminder-service, Channel 5 ‘Movie Bonanza, CCRTV daily micro-show “I have no word”,
BBC World Service News by SIMS, Gossard ‘G4me’ direct response campaign). Section 3
summarizes the reported cases in the form of a taxonomy of strategies fueling SMS interactive
television services (get viewers’ feedback, increase viewing share/improve viewers’ loyalty),
provide interactive entertainment, mobile commerce, interactive advertising). Section 4
provides original empirical data on viewers’ participation and service effectiveness, from SMS
interactive television trials conducted from the Greek Public Radiotelevision (ERT). Finally, in
the last section, we review industry participants and strategic intentions/positions, analyze the
15
Ithiel de Sola Pool, Technologies of Freedom, The Belknap Press of Harvard Univ. Press, Cambridge (Mass.),
1983
value chain of the emerging activity, explain how key resources and competences for providing
interactive television services are split across organizational boundaries, evaluate business
opportunities, and discuss the effectiveness of SMS interactive television compared with
previous television trials and marketplace experiences.
JEL Code/Keywords:
Keywords Mobile Networks, SIMS, Interactive Television, Case Studies, Emerging Technologies and
Competition
AI IMPACT OF ICT IN ASIA: CHAIR: MR. SUNG
DISCUSSANT: MR MÖLLERYD, MS NANDI
AI 1.1
DYNAMICS IN THE ICT MANUFACTURING MARKET IN THE GREATER CHINA REGION
Authors: Dieter Elixmann, Cornelia Stappen, WIK GmbH, Germany
Currently the Information and Communications Technology (ICT) market in the Greater China
Region (GCR, encompassing PR China, Taiwan, and Hong Kong) is going through deep
changes. Several reasons for this can be mentioned. Firstly, the PR China and Taiwan have
entered the World Trade Organisation. Secondly, changes in the division of labour between the
three regions can be observed. Thirdly, the PR China is the growth engine in Asia and a lot of
foreign ICT enterprises already have or are planning to establish business activities there.
Fourthly, technical progress in the ICT market is particularly dynamic.
Against the backdrop of these developments the paper is aiming at:
 Highlighting the current market structure and development patterns of the ICT
manufacturing markets in the GCR,
 Analysing the interrelationship of the ICT industry in the GCR,
 Identifying the driving forces of changes,
 Assessing challenges for foreign enterprises regarding market entry.
The paper will be organised into seven chapters. After an introduction of the main issues and
the objectives of the paper Chapter 2 focuses on an appropriate segmentation of the ICT
market. The study encompasses the segments manufacturing of (1) telecommunications goods,
of (2) data communications goods, and of (3) PC equipment as well as (4) the development of
software and (5) the provision of IT services.
Chapter 3 contains an analysis of the market structure and of the main development patterns
within the ICT market segments in GCR. The focus is e.g. on market volumes, the positioning
of foreign and domestic companies, respectively, in these segments and on the changing
importance of R&D, production and distribution activities within the ICT firms active in the
GCR. It will become obvious that the dynamics across the ICT market segments of the three
regions as well as the business strategies of the players are very different.
Chapter 4 will investigate new patterns of the division of labour in the GCR regarding the ICT
industry. The PR China is catching up in many ways and Hong Kong and Taiwan are loosing
their previous competitive advantages. All of the three regions are eager to establish new core
competencies. Moreover, new links between the ICT industries in the PR China, Hong Kong
and Taiwan are established. For example the growing investments of Taiwanese chip
manufactures in production locations in the PR China leads to a closer interrelationship
between the Taiwanese and Chinese industry.
In chapter 5 we will discuss the impact of
 China’s accession to the WTO, and of
 New industrial policy measures of the governments of PR China, Taiwan, and Hong
Kong
on the development of the ICT market in the GCR. Especially because of China’s accession to
the WTO fundamental political, social, and legal changes are expected. In the course of these
changes also the basic conditions for foreign investors will become more transparent and will
lead to a deeper integration of the PR China into the world market. In the GCR a lot of
industrial policy programmes are existing to promote the domestic industry in general and to
create favourable investment conditions for foreign investors. In addition, in particular in the
PR China high budget programmes are aiming at supporting specific branches of the economy,
for example the establishment of an efficient Chinese software industry. Taiwan’s industrial
policy gives financial support especially for R&D projects for the IT-industry. The industrial
policy of Hong Kong does not support so much manufacturing activities, rather, the focus is on
the establishment of a service oriented business environment.
In Chapter 6 we will discuss the challenges foreign ICT enterprises are facing by entering the
markets in the GCR. Especially in the PR China we see a high potential for market entry
because of the growth of the markets. In addition WTO accession will lead to a general
improvement of business activities for foreign firms. But there are a lot of challenges as well.
Due to a complex legal and regulatory environment foreign enterprises are facing high
information costs. Intellectual property rights are a crucial issue. Data about market potential,
the market environment, competitors and potential Chinese partners which is inevitable for
setting up a real business case are not easily available. Often empirical data sources are
inconsistent. Building up of a personal network is important. Market entry into China requires
a long-term commitment and the openness to adapt to other socio-cultural modes of doing
business than in Europe.
The paper will be closed with the conclusions in Chapter 7.
The paper is based on a project currently conducted by WIK-Consult on behalf of the German
Ministry of Economics and Labour (BMWA). The results of the project are based on the one
hand on desk research and on the other hand on a lot of personal interviews with
representatives of manufacturers, universities, research institutes, and of ministries and other
governmental entities in Germany as well as in PR China and Hong Kong. In addition relevant
conferences both in Germany and in the GCR have been attended.
JEL Code/Keywords:
Keywords: Greater China Region,information and communications technology,industrial
economics,market structure,market development,industrial policy,WTO
AI 1.2
TELECOM MARKET TRANSFORMATION IN CHINA
Author:Ping Gao, Copenhagen Business School, Denmark
This paper first suggests a revision on the definition of telecommunications transformation
strategies in literature, and then uses it to investigate China’s experiences of
telecommunications reform by drawing on structuration theory. The authors conclude that a
strategy of telecommunications market transformation must be formed based on the economic
and political environment, telecommunications development situation, the characteristics of
technology advance, and market requirement.
Keywords: China, Strategy, Structuration theory, Telecommunications
AI 1.3
ESTIMATING THE EFFECTS ON PRODUCTIVITY AND COSTS OF TELECOMMUNICATIONS
MERGERS
Authors: Nakil Sung, The University of Seoul, Korea
The paper attempts to examine the effects of two US local telecommunications mergers on
productivity and costs of their operating companies; (1) acquisition of Pacific Telesis
(April/1997) and Southern New England Telecom Corp (October/1998) by SBC
Communications and (2) acquisition of Nynex (Oct./1997) by Bell Atlantic Corp. The postmerger performance of merged local exchange carriers (LECs) is not only compared with their
pre-merger performance over time, but also compared with that of non-merged LECs. The
performance of LECs is measured by total factor productivity (TFP) and shifts in total cost
function. The Empirical analysis is carried out with annual data for 38 reporting LECs over the
period 1991-2000.
The analysis provides several interesting findings. First, we observe no significant increase in
TFP for merged LECs for the post-merger period and also, no systematic difference in TFP
between merged and non-merged LECs. Second, the TFP regression analysis shows that
mergers did not have statistically significant effects on the TFP. Third, the cost analysis
indicates that mergers may even increase costs. We control for demand fluctuations, the state
of technology and two policy factors (regulation and competition) in both productivity and cost
analysis. Forth, there is no significant change in returns to scale (economies of scale) between
merged LECs and others, and also, between pre- and post-merger period. Based on all these
findings, we conclude that the mergers did not exhibit any positive effect on productivity and
costs of their operating companies. Moreover, the mergers did not play a role of catalyst for
cost cutting or restructuring.
JEL Code/Keywords
JEL classification L11; L96
Keywords: Merger; Total factor productivity; Cost function; Economies of scale
<References>
Ai, Chunrong, and Sappington, David E. M., “The Impact of State Incentive Regulation on the
U.S. Telecommunications Industry,” Journal of Regulatory Economics, 22(2), 2002, 133-160.
Caves, Douglas W., Christensen, Laurits R., and Diewert, W. Erwin, “Multilateral
Comparisons of Output, Inputs, and Productivity Using Superlative Index Numbers,”
Economic Journal, March 1982, 73-86.
Gort, Michael and Nakil Sung, “Competition and Productivity Growth: The Case of the US
Telephone Industry,” Economic Inquiry, 1999 Oct., 678-691.
Sung, Nakil and Michael Gort, “Economies of Scale and Natural Monopoly in the U.S. Local
Telephone Industry,” Review of Economics and Statistics, Nov./2000, 694-697.
PAPERS NOT TO BE PRESENTED:
REALIZING DIGITAL LIFE IN KOREA: CORE TECHNOLOGY AND PROMOTION POLICY16
Authors: Jungmann Lee*, Kiyong Om , Myung-Hwan Rim, Yeong-Wha Sawng,
Electronics and Telecommunications Research Institute, Korea
South Korea (hereinafter Korea) is leading the world in some forefront IT areas including high
speed internet, mobile phones, PC penetration, DRAM, display equipments, internet
appliances, set-top boxes, online network games and so on. Especially, with regard to
broadband access to the Internet, Korea is by far the leading performer in the OECD area
(OECD, 2001). In November 2002, Korea’s broadband penetration passed 20 subscribers per
100 inhabitants. The government, however, has been worried about the underutilization of the
superb IT network infrastructure. As a possible solution to the problem, the promotion of
“digital life” is being examined thoroughly from various points of view. The digital life aims to
enrich our daily lives by enabling us to remain connected with communication networks
anywhere anytime in order to do anything we want to do from work to entertainment.
Considering a worldwide recession in the IT sector and the underutilization of the IT capacity
almost everywhere, digital life could be an effective way to promote the IT demand in the
market as well as to provide individuals with more convenient and enjoyable life.
In this contribution, we will first provide the definition and reason for the introduction of
digital life, and then explain the procedure for deriving core technologies that are essential to
make digital life work, and finally suggest short-term and long-term policies to promote the
realization of digital life in Korea. The expected impact of digital life on the economy and
society will also be discussed in the last part.
JEL Code/Keywords:
Keywords Technology policy, digital life, digital service, core technology, validity analysis,
and promotion strategy.
T TELECOMMUNICATIONS: LICENSE AUCTIONS & ACCES PRICING:
JOINT EARIE-ITS SESSION, CHAIR: MR. VON DE WIELLE
T 1.2 203
LICENSE AUCTIONS WHEN WINNING BIDS ARE FINANCED THROUGH DEBT
Author: Marco Haan, Linda Toolsema, University of Groningen, NL
We study an auction where two licenses to operate on a new market are sold. Winners finance
their bids on a competitive debt market. Due to limited liability, the amount of debt affects
their behavior on the product market. In equilibrium, consumer prices are lower than with a
beauty contest, where firms obtain their licenses for free. Winning bids are lower than in a
model where firms have internal funds. Higher bids cannot be financed due to credit rationing.
Expected net firm profits are strictly positive, although firms are a priori identical and have the
same information.
REGULATE OR DEREGULATE: INFLUENCING NETWORK INTERCONNECTION
CHARGES
Author: Bart von de Wielle, Belgium
16 This paper is a further development of “ Research on IT R&D and Innovation Systems” project sponsored by the Ministry
of Information and Communication, Korea.
* Corresponding Author, IT Technology Management Research Institute, ETRI, 161 Kajongdong, Yusonggu, Taejeon 305-600,
KOREA
PAPERS NOT TO BE PRESENTED:
T 1.1 517
IS THE OPTIMAL AUCTION A BEAUTY CONTEST? A MODEL OF AUCTIONS, ASYMMETRIC
INFORMATION AND REGULATION
Author : Matthew Bennett, Universite Toulouse, France
With the increasing popularity of auctions to sell scarce resources (such as telecoms spectrum,
gas storage capacity, television rights etc), their impact on the relationship between regulation
and competition is an important consideration. This paper analyses this via the introduction of
an auction stage into an anti-trust model similar to Besanko and Spulber (1989). Three
surprising results follow; firstly, the use of the auction does not increase quantities, as the use
of this instrument to reveal cost types conflicts directly with the auction winning rule.
Secondly, the optimal auction is identical to a beauty contest as equilibrium bids are
independent of firms' types. Thirdly a mechanism, in which the regulator dictates both the
optimal bid and the winner dependent on type, strictly increases welfare over the optimal
auction. This result indicates that when governments maximise total welfare a hybrid
mechanism is more efficient than an auction. Lastly we show that these results are robust even
when governments derive significant levels of welfare via the bid revenues.
RF THE NEW EU REGULATORY FRAMEWORK: CHAIR MR. RUHLE
RF 1.1
MARKET DEFINITION AND MARKET ANALYSIS IN THE NEW FRAMEWORK FROM A
REGULATORY PERSPECTIVE
Author: Wolfgang Beran, RTR-GmbH, Austria
This document only reflects the personal view of the speaker and cannot prejudice the
interpretation or weight attributed to certain criteria by the Austrian regulatory authority both
in the market definition and analysis procedure in any way.
1.
Introduction
New EU-Telecommunications Regime
The new EU-telecommunications framework entered into force on 24 April 2002, obliging the
EU-Member States to fully implement the package as adopted by the European Parliament and
the Council on 7 March 2002, containing four Directives and one Decision17. The new EU
regime, which had to be implemented until 25 July 2003, aims to move from the current ex
ante-regulation regime (Open network provision – ONP) towards application of general EUCompetition Law under consideration of ex ante regulation aspects. A second aim of the new
framework is to implement a technologically neutral legal framework for telecommunications,
media and information technology in order to consider convergent communications and media
sectors.
This paper is structured as follows:
1. Market definition
Overview of the market definition process to be carried out in the new
framework
2. Market analysis
A short interpretation of the relevant sections of the EC guidelines on market
definition and SMP-designation
17
Framework Directive 2002/21/EC, Access Directive 2002/19/EC, Authorisation Directive 2002/20/EC,
Universal Service Directive 2002/22/EC, Radiospectrum Decision 676/2002/EG
3. Ongoing need for ex ante regulation in the new framework
A list of arguments why ex-ante regulation is still adequate for regulation the
communications sector
4. Implementation in Austria
A short overview of the competent regulatory authorities for market definition and market
analysis
RF 1.2
THE NEW EU REGULATORY FRAMEWORK FROM A REGULATOR'S PERSPECTIVE
Author: Annegret Groebel, RegTP, Germany
The presentation will give a short overview of the new EU Regulatory Framework from a
regulator's perspective and with a focus on the co-operation requirements (ERG) as well as the
implementation problems and the practical steps undertaken so far. A short comparison with
the current regime will be made and the major changes highlightened. Also, the new
consolidation procedure (Art.7-FD-procedure) will be explained and possible implications
outlined. The presentation concludes with an overview of the status of transposition in Europe
and the draft law of Germany.
RF 1.3
TRENDS IN AMENDMENT OF GERMAN TELECOMMUNICATIONS ACTS
Author: Arne Börnsen, A.T. Kearney, Germany
The last year until February of this year the EU published directives for the harmonization of
the national telecommunications Acts. A first “draft of a draft” was published and
commentated in Germany between February 20, 2003 and March 12, 2003. The German
Ministry on Economics and Employment announced the final draft for April 7, 2003. Around
four weeks later the draft could be decided by the Cabinet, afterwards the Bundesrat, the
Chamber of the German States, will give its comments. Probably the Bundesrat could decide
about these on July 7, 2003, the first comment of the Parliament then would be in the
beginning of September, the final decision at the end of 2003.
The first unofficial draft of the amendment is unsatisfying. The bureaucratic processes
provokes by such an act will take much more time than today, either the incumbent nor the
competitors will get any advantages by faster procedures. In addition the draft did not give
clear answers to the question only to regulate the fees of pre-products of the incumbent, but to
do without ex-ante-regulation of the customer fees.
The draft offers a lot of undefined words and sentences, this might be corrected when the
second draft will be published in April 2003, but is not known when writing this paper. In
addition some really important parts of the Act are not published until today, e.g. about the
organization of the Regulatory Agency or about the competences in regulation of frequencies, if this still will be a competence of the Agency or if it will be part of “industrial politics” and
responsibility of the Ministry.
Therefore some key elements of the speech are unknown today and will only be named as
bullet points:
1. New EU Regulation - A new EU regulatory recommendation has to be
implemented until 23.07.2003
Basic Principles of EU-RegulationEnsure that customers have maximum advantage
concerning variety, price and quality
 Ensure that there is no distortion or limitation in competition of electronic
communication
 Foster efficient infrastructure investments and innovation
2. Past and current EU Regulation

The telecommunications markets are moving from the former state owned
monopoly market to a competitive market environment.Where the EU is the driving
force to ensure that regulation according to the new recommendation is implemented in
national bodies.The basic framework for regulation in the EU is becoming more and
more harmonized.
RF 1.4
EVALUATION OF NEW REGULATORY FRAMEWORK OF EUROPEAN UNION
－FROM JAPANESE PERSPECTIVE
Author: Hidenori Fuke, Kansai University, Japan
1. BACKGROUND
EU adopted a new regulatory framework for Electronic Communications (hereafter called
‘2003 framework’) in March, 2002 to respond to the development since it opened to
competition all the telecommunications markets including public voice telephony on January 1,
1998. All the member states are required to implement new framework by July 2003. While
traditional telecommunications sector has been going through the liberalisation process, the
Internet exploded and various media begin to converge. The 2003 framework is said to be an
answer to the progress of competition and the convergence. This is the first attempt in the
world that tries to apply a unified regulatory framework to telecommunications and
broadcasting.
The Japanese MPMHP (Ministry of Public Management, Home Affairs, Posts and
Telecommunications) laid a bill before the Diet in March, 2003 amending the
Telecommunications Business Law in order to respond to the changes since the liberalisation
of the market in 1985. The Ministry says that this new law will accommodate the progress of
competition and the diffusion of the Internet.
The author founds three common key words between these two aggressive attempts. They are
cross-media regulation, abolishment of individual licence and transition to ex post regulation.
This paper tries to evaluate the 2003 framework from Japanese perspective by focusing
discussions on these points.
2. CROSS-MEDIA REGULATION
The 2003 framework introduces cross-media regulation to respond to the development of
media convergence accelerated by the diffusion of the Internet. The new regulatory framework
based on the division of info-communications industry into transmission networks (Electronic
Communications Network), transmission services (Electronic Communications Service) and
contents coincides with the layered structure of the industry. However, the most controversial
problem, namely contents regulation is left behind as it is now.
Telecommunications regulation used to be applied to the Internet and traditional sector specific
regulation is applied to broadcasting in both EU and Japan. Many of the contents on the
Internet are open to the public and different from traditional telecommunications contents. On
the other hand, it is not always desirable to put them under broadcasting regulation. Thus it
becomes necessary to treat contents in a uniform manner whether they are offered on the
Internet or through broadcasting. The 2003 framework is not responding to this new
development.
3. ABOLISHMENT OF INDIVIDUAL LICENCE
Individual licence system is abolished and general authorisation system based on notification
from undertakings to the regulatory authority is adopted. However, there are two concerns
regarding the actual application of this system. Electronic Communications network and
service often accompany the use of radio frequencies, numbers and rights of way. Without the
liberalisation of the use of these accompanying resources, general authorisation might work as
de-facto individual licensing. In the case of Japan, one of the reforms to be introduced by the
bill laid by the Ministry is the abolishment of individual approval system for the entry into
telecommunications business. However, not only there is no mention in the bill on the use of
radio frequencies but also undertakings requesting rights of way are required to get
certification of the Ministry. The criteria for the certification are almost same as former criteria
for the approval. In the case of EU, it is not clear how each country is going to award these
rights and the same kind of concern cannot be excluded.The other is related to broadcasting. In
2003 framework, it is allowed to put additional conditions on broadcasting contents operators
and this might work as an entry regulation. In the case of Japan, the Law Concerning Broadcast
on Telecommunications Services regulates so-called internet broadcasting and many worry that
this law might regulate the distribution of contents on the Internet in the name of broadcasting.
The same concern might hold true in the case of EU.
4. TRANSITION FROM EX ANTE REGULATION TO EX POST REGULATOION
One of the most important changes introduced by 2003 framework is the transition from ex
ante regulation to ex post regulation that is based on market definition. It is found from the EU
document (EU [2003]) that the markets that are supposed to under ex ante regulation are too
widely defined. They include both wholesale and retail markets. The author doubts whether
there are strong grounds on this decision. The only reasoning for ex ante regulation in the
Electronic Communications is the existence of essential facilities. As far as essential facilities
exist, ex ante regulation regarding interconnection is justified. In other field, ex post regulation
relying on competition law should be applied.
5. Conclusion
Although the 2003 framework is epoch-making, it is not free from constrains regarding the
three points discussed. It is necessary to depart from the regulation that was effective in the era
of POTS and to reform the regulatory framework by taking into account the diffusion of the
Internet. With the commoditisation of the services, it is necessary to give up the sector specific
regulation and to rely on competition law.
[Bibliography]
1. European Union（2002）Access Directive, Authorisation Directive, Framework Directive,
and Universal Service Directive
2. European Union (2002), Commission Guidelines on market analysis and the assessment of
significant market power under the Community regulatory framework for electronic
communications networks and services
3. European Union（2003）Commission Recommendation of 11/02/2003 On Relevant
Product and Service Markets within the electronic communications sector susceptible to ex
ante regulation in accordance with Directive 2002/21/EC of the European Parliament and
of the Council on a common regulatory framework for electronic communication networks
and services (C(2003)497)
4. Garzaniti, Laurent（2000）Telecommunications Broadcasting and the Internet E.U.
Competition Law and Regulation , London
JEL Code/Keywords:
JEL Codes L96
Keywords::: Broadcasting, Competition law, Contents regulation, Entry regulation,
Ex post regulation, Media convergence, Telecommunications
AR I: ANTITRUST AND REGULATION ISSUES I: CHAIR MR. HAYEE
AR I 1.1
A CRITIQUE OF THE NEW UK RETAIL REGULATION – DIFFERENCES FROM THE
PREVIOUS APPROACH AND LOOPHOLES
Author: Momin Hayee, BT Analsysis & Forecasting, UK
AR I 1.2
MODELING REGULATORY REGIMES FOR LAST-MILE BROADBAND CONNECTIONS IN A SINGLEPROVIDER MARKET: A MULTI-MODEL APPROACH
Authors: Richard Curry, London Business School, UK
Kiriakos Vlahos, Athens Laboratory of Business Administration, Greece
We present a simulation model of the transition of consumers from voice-only to broadband
telecommunications under various regulatory regimes designed to encourage adoption. Regulators
strive to ensure wide and eventually universal consumer access to broadband technologies at
reasonable prices. To achieve that they need to encourage investment, but at the same time they
need to prevent incumbent telecommunication companies from trying to exploit their dominant
position in the market. This often requires a fine balancing of regulatory policies.
Determining the effect of these policies requires the study of the life cycle of three technologies,
voice-only telephones, narrowband Internet, and broadband Internet. Voice-only is a mature
industry, accessible by the vast majority of the population, while l narrowband Internet is in its
growth stage of development and broadband is still in the introduction stage. To model the
migration from voice-only and narrowband to broadband telecommunications, we have developed a
model that considers the different economic agents of the industry including: consumers,
telecommunications providers, and a regulatory agency. The model simulates the migration of
consumers from traditional voice-only communications through advanced services available using
narrowband Internet and finally to intensive levels of service that require or benefit from broadband
connection.
The model focuses on the local loop, which is the “bottleneck” for the adoption of broadband, and
considers in detail the decision process of the incumbents. Given an expected consumer demand
function, incumbents act as optimizing agents, making pricing decisions for narrowband and
broadband services and investment decisions regarding network capacity, so that they maximize
expected profits, subject to regulatory constraints. Price determines the rate of transition between
technologies, constrained by the availability of newer technologies. The regulator constrains the
actions of the incumbent by setting investment targets and price caps during each time-period in the
model. The model is implemented in a new innovative multi-modeling platform that enables the
integration of different modeling frameworks, in this case simulation and optimization.
Using the broadband multi-model, we simulate market conditions based upon those in the United
Kingdom starting from 2000. We consider a wide spectrum of regulatory policies starting from
unregulated monopoly pricing for both advanced and intensive services. We then consider a mixed
market structure having a competitive narrowband sector and a regulated broadband sector. Three
static and two dynamic policies are examined with various price cap regimes. Finally, a static policy
is examined with competitive conditions in both narrowband and broadband markets.
The broadband adoption multi-model provides some important insights. The first confirms the
assumption that, properly implemented price caps result in an increase in adoption without hindering
investment. In our results, broadband adoption doubles under a mild price cap when compared to
the monopoly pricing case. The second result is that increasing the market for services is very
beneficial. For example, increasing the adoption of narrowband services by encouraging
competition provides a 10-percentage point gain in broadband adoption even if there is only a small
price decrease for broadband. Finally, policies with dynamic price caps do not appear to have a
large effect on broadband adoption when compared to constant price caps with similar final prices,
although it does appear to hurt the incumbent by decreasing revenues and profits.
JEL Code/Keywords:
JEL Codes L1, L5, L9, O3
Keywords: Telecommunications, Broadband, Regulation, Simulation, Multi-Model
AR I 1.3
COMPETITION IN THE COMMUNICATIONS SECTOR:
CAN UNPREDICTABILITY BE REGULATED?
Author: P. H. Longstaff, Syracuse University, Harvard University, USA
What does it mean to regulate a system that is unpredictable? How can any government
regulation deal with systems that are constantly evolving? This suggests a new foundation for
regulating and managing competition in complex systems like the communications sector. By
admitting that some systems are unpredictable policy makers and managers can avoid the
Blame Game: the scapegoating that takes place when things don’t turn out as predicted. This
does not mean they are not accountable, it means they are accountable for things they can
actually control.
The paper begins with a brief and multidisciplinary examination of complex, unpredictable
systems and then explores what it means to “regulate” a system you can’t predict. The critical
difference between tightly and loosely coupled systems is then examined in order to help
devise different regulation for each of them. The role of feedback in these systems is developed
as a critical but often lacking element in their regulation.
The paper gives some examples of how all these ideas work together and some thoughts on
specific strategies and tactics that will be more effective at regulating or managing
unpredictable processes like competition in the communications sector. What everyone wants
is a simple set of instructions that can be applied to predictable problems and will result in
predictable outcomes. Alas, this paper has no “Simple Rules For Predictable Regulation of
Competition.” But the ideas developed here can make the regulation of competition more
reliable, even if what we seek to regulate remains unpredictable. Specifically, policy makers
can:
1. Treat the communications sector as a complex system that will often be unpredictable.
2. Make it clear that unpredictability does NOT mean ungovernable. Regulators and the firms
they regulate are not unaccountable – they are just accountable for different things.
3. Assume that the Blame Game is an inefficient and wasteful correction mechanism.
4. Revise the regulatory methods to recognize that the interaction of competition and
cooperation in the communication sector are part of a PROCESS that will continue to evolve
after you intervene to regulate/manage it – this interaction must be managed as an ongoing
process.
5. Analysis of actual or potential competition or cooperation should include knowing whether
the firms (or the firm and its customers) are tightly or loosely coupled and whether tighter
regulation will make them more or less unstable.
6. Acceptable parameters for competition and cooperation in the communications sector must
be more carefully defined and a feedback mechanism set up to determine when the system
has moved outside those parameters.
7. The parameters for competition and cooperation should take into account the fact that old
technological boundaries between industries in the communications sector may no longer be
appropriate for counting the number of firms who are competing for the same scarce
resources. Regrouping them by their function in the communication process will help to
reduce this problem.
JEL Code/Keywords:
JEL Codes K21
Key Words: Competition Policy
AR I 1.4
INTERNET INTERCONNECTION:MARKET POWER IN THE BACKBONE INDUSTRY?
Authors: Margit A. Vanberg*, ZEW (Centre for European Economic Research), Germany
Developments in the market for Internet backbone capacity and particularly the merger of two
of the four largest firms in this market, Worldcom and MCI, in 1998 spurred a large body of
literature on the role of antitrust policy in Internet interconnection. Unlike most other
telecommunications activities, Internet service provision evolved in a largely unregulated
environment. The recent discussions surrounding Internet backbone activities suggest,
however, that it is by far not certain that this market will remain unregulated.
The concerns raised with respect to the market for top-level Internet connectivity focus on the
strong network externalities in the Internet industry. End-users demand universal connectivity
from their Internet Service Provider (ISP), that is, the ability to communicate with all other
Internet users, irrespective of the network they are connected to. Since ISPs can achieve
universal connectivity only through interconnection with at least one top-level backbone
network (European Commission, 2000: 13), the competitiveness of the top-level Internet
connectivity market is essential for the competitiveness of the entire industry.
Proponents of regulation in Internet interconnection argue that the market for top-level Internet
backbone connectivity is highly concentrated and that there are high barriers to entry into this
market. They believe that this has put operators of top-level backbone networks in a position to
dictate the conditions of interconnection. Some argue that Internet backbone operators are
charging interconnection rates above the competitive level (Kesan and Shah, 2001: 148 and
155). Others argue, that top-level network providers have an interest in degrading the quality of
interconnection to smaller competitors, because they can thereby induce end-users to switch
home-networks, or at least to multi-home with the providers of top-level connectivity (Crémer
et al., 2000).
This literature seems to suggest that there is a role for sector-specific regulation in Internet
interconnection. The purpose of this paper is to look into this claim from the perspective of the
disaggregated approach to sector-specific regulation (Knieps, 2000). The disaggregated
approach sees regulation justified only in instances where natural monopoly is not disciplined
by potential competition. In this approach the contestable markets theory of Baumol et al.
(1988) acts as the theoretical reference model of a competitive market.
Starting point for the analysis is the theory of natural monopoly. Sharkey (1982: 73- 82)
differentiates between two forms of natural monopoly. The first form, called “plant
subadditivity”, is the form of natural monopoly that economists generally have in mind. It
results from the technological characteristics of production. The second form of natural
monopoly, “firm subadditivity”, results from organizational advantages in single-firm
production. Both forms of subadditivity should be considered for a complete antitrust analysis
of the market for Internet backbone connectivity. Because a thorough analysis of both facets
would go beyond the scope of this paper, the present analysis focuses on the first aspect of
natural monopoly. Related research by the author addresses the second aspect. Plant
subadditivity results from large economies of scale and scope, due to factors such as fixed cost
of production, common costs, and the use of specialized resources. The present paper analyses
these aspects in the context of Internet technology by first giving a short account of the
relevant aspects of Internet history and Internet technology, insofar as they help to understand
the organization and cost structure of the Internet. Subsequently, the paper develops a model of
the architecture of the Internet as a basis for a differentiated analysis of cost characteristics on
the level of single network elements making up the Internet. The analysis of the cost
characteristics is completed by an analysis of the entry conditions, particularly the question
whether entry requires substantial investments in sunk costs. The preliminary conclusions
suggest that Internet backbone markets show characteristics of natural oligopolies. This finding
is supportive of Milgrom et al. (2002), whose bargaining model of peering arrangements
predicts that in an oligopolistic market, Internet backbone operators have sufficient incentives
to compete for customers (including smaller ISPs) in order to remain attractive for top-level
peering agreements. This conclusion does not justify ex-ante regulatory interference into
Internet interconnection. Rather, it is the task of general competition policy to closely attend
the consolidation process in the telecommunications market with an eye to the potential
consequences for the market structure in the Internet backbone market.
JEL Code/Keywords:
JEL Codes D4, K2, L51; L96
Keywords Internet, Networks, Interconnection, Regulation, Competition Policy
Bibliography Items
Baumol, W., J. Panzar and R. Willig (1988), Contestable Markets and the Theory of
Industry Structure, New York.
Knieps, G. (2000), Der disaggregierte Regulierungsansatz der Netzökonomie, in: Knieps, G.
and G. Brunekreeft (Eds.), Zwischen Regulierung und Wettbewerb: Netzsektoren in
Deutschland, Heidelberg.
Cremer, J., P. and J. Tirole (2000), Connectivity in the Commercial Internet, The Journal of
Industrial Economics 48/4, 433-472.
Kesan, J. and R. Shah (2001), Fool Us Once Shame on You - Fool Us Twice Shame on Us:
What We Can Learn from the Privatizations of the Internet Backbone Network and the
Domain Name System, Law and Economics Working Paper Series No. 00-18, Illinois.
Milgrom, P., B. Mitchell and P. Srinagesh (2000), Competitive Effects of Internet Peering
Policies, in: Vogelsang, I. and B. Compaine (Hrsg.), The Internet Upheaval: Raising
Questions,Sseeking Answers in Communications Policy, London, 175-195.
Sharkey, W. (1982), The Theory of Natural Monopoly, Cambridge.
Commission of the European Communities (2000), Commission Decision of 28 June 2000
on Case No COMP/M.1741 – MCI Worldcom/Sprint, Brussels.
PAPERS NOT TO BE PRESENTED:
“Next Generation Networks“ and Challenges for Future Regulatory Policy
Author: Dieter Elixmann, WIK GmbH, Germany
Up until today regulatory policy and measures relating to providers of telecommunications
services are virtually based on architectural and topological characteristics of circuit switched
networks. The provision of data transmission services resting on packet switched technologies,
however, is more or less not affected by regulatory policy. The clear separation of circuit
switched and packet switched networks and services provided via these networks becomes,
however, more and more obsolete due to technological developments. It is fair to say that a
shift of existing telecommunications networks towards “Next Generation Networks (NGNs)“ is
already underway.
There are two main objectives of the paper. We are aiming at
 highlighting
these
technical
developments
currently
underway
regarding
telecommunications networks,
 illuminating challenges for telecommunications policy in the future in particular with
respect to network access, interconnection and unbundling regimes.
The paper will be essentially organised into five chapters. After an introduction outlining the
objectives and main issues we will briefly address in chapter 2 the current characteristics of
circuit switched telecommunications networks.
Chapter 3 will deal with characteristics of NGNs. Although there is no clear-cut and generally
accepted definition of a NGN we will provide an overview of essential features. An NGN is a
platform (presumably IP based) capable to handle voice, data and video traffic simultaneously
and in which the transport layer and the control layer are separated. Moreover, in contrast to
the centralized architecture of the circuit switched PSTN/ISDN networks where the switch
with all its hardware, call control and services software is located in the geographical market it
serves, in the NGN architecture the functional elements are fully distributed within the
network. In this chapter we will in addition highlight the idiosyncracies of softswitch based
architectures. In this context the IETF backed SIP protocol and the ITU backed H.323 protocol
play a prominent role.
Chapter 4 will be focusing on an analysis of potential implications of NGNs for the basic
economics of telecommunications service provision, the future business strategies of players in
the market as well as for the market structure. It is highly likely that NGN architectures provide
for a substantially altered mode of service provision in the telecommunication area. Firstly,
competitors are able to use signaling- and control functions of the network for their own
purposes enabling them to create and provide innovative services independently of a network
operator. Secondly, network elements can be used separately so that new business strategies
can be developed (e.g. non-facilities-based market players can provide management functions
of a NGN), and thirdly, services can be created directly by end users.
It can be taken for granted that implementation of a NGN will not be disruptive, rather, there
will be a gradual migration of networks. Thus, for a foreseeable future we will witness a
coexistence of circuit switched and packet switched networks. In chapter 5 we therefore want
to present an overview of current directions of implementation of NGN elements by network
operators. We can observe today e.g. that fixed-link voice telephony transmission at least in the
backbone is more and more resting on packet switched technologies. Moreover, Voice over IP
has overcome many of its quality of service problems due to developments within the IPv4
protocol (e.g. DiffServ, IntServ) and may experience an additional boost if IPv6 is widely
deployed. Softswitch based architectures have been implemented on a considerable scale in the
U.S., however up until now mainly as a substitute of CLASS 4 switches.
Chapter 6 will address potential challenges for telecommunications policy generated by (the
migration to) NGNs. Crucial issues that come to mind are e.g. :
 Which are candidates for essential facilities (e.g. softswitches, gateways, IP termination)?
 Are there incentives for vertical integration and in turn foreclosure or degradation of
quality of service for competitors?
 What are the pros and cons regarding unbundling of network elements/-functions in a NGN
environment (e.g. open access vs. network integrity and data security considerations)?
 How to safeguard fair interconnection rules in packet switched networks (i.e. regarding
peering and transit agreements between ISPs)?
 How to safeguard interoperability of networks?
The paper is based on research projects conducted by WIK on the economics of IP backbone
services and “Next Generation Networks” as well as on a workshop titled “Network access and
interconnection in IP based networks” organized by WIK and RegTP in October 2002. These
projects have been based on the one hand on desk research of relevant literature and web sites
of manufacturers and operators. On the other hand, a lot of personal interviews have been
conducted with manufacturers and operators alike.
The presentation will mainly be focused on chapter 3 and chapter 6 of the paper.
Key Words: Next Generation Networks, Regulation, Circuit switched networks,
Packet switched networks, Softswitch, Interconnection, Unbundling, Interoperability
ICT II Impact of ICT II: chair Mrs. Firth
ICT II 1.1
ONLINE MEDICAL APPLICATIONS MALAIS
Author: Lucy Firth, University of Melbourne, Australia
Interest in online medical applications as solutions for remote, regional and other under
serviced communities and populations has increased steadily since 1906 when the idea of
telecardiology was first discussed. Today, broadband offers the potential for the exchange of
diagnostic quality images and other files in what could be seamless, straight-through
processing. However, the rate of uptake of telemedicine has been disappointingly slow.
Meanwhile, health budgets, waiting lists, and access and standard of service issues for our
aging populations continue to grow.
This raises three questions:
 What potential is there for broadband to improve medical services?
 Does telemedicine promise to resolve problems of access to medical professionals
while addressing budget problems?
 What is retarding the uptake of telemedicine if it promises so much?
This paper addresses these three questions by reviewing the literature on the adoption of a
range of telemedicine application. The method for a current study of the uptake of online
radiology image sharing is presented.
The first question (What potential is there for broadband to improve medical services?) has a
broad purview. The internet in general, and broadband in particular, has the potential to aid
medical practice in three related but distinct ways, which are discussed in turn in the paper:
 Facilitating the education and training of professional staff – this has the potential to
improve not only quality of service over the long run, but also staff morale and
professional standing.
 Enabling on line medical applications – this has a more immediate impact. While it has
attracted the most attention and media interest, it is the area most delayed.
 Recording and managing patient records – this will enable centralized records that may
be more efficient, but may also raise issues of privacy.
The second question (Does telemedicine promise to resolve problems of access to medical
professionals while addressing budget problems?) forms the central part of this paper. The
technical abilities of online medical applications now and likely in the near future are
considered along with their distribution and likely impacts on budgets. The range of online
medicine applications enable scenarios such as a patient seeking remote diagnosis in the
absence of medical professionals, and a medical professional seeking specialist input to a
treatment issue – either in real time or capture and send. In sum, it seems that online medical
treatment is considered by most to be an adjunct to rather than a replacement for face-to-face
consultation. In the absence of medical expertise, the equipment to capture the required data is
typically too difficult for lay use. Efficiency gains from remote second opinions may be great,
but has billing and interorganisational cooperation implications.
The third question (What is retarding the uptake of telemedicine if it promises so much?) is
perhaps the most interesting from a policy and political perspective. Issues of cost and
infrastructure availability are dealt with as are organizational and interorganisational factors
that prevent the sharing of files. This last question is the subject of current research by the
author. While the paper outlines the method, the presentation of the paper will focus on
findings.
The paper concludes that there is a malaise in the rate of exploitation of broadband’s potential
to improve medical services, access and knowledge largely for non-technical and noneconomic reasons. These reasons include professional jealousies, accounting practices, and
concerns with privacy. The papers main theoretical contribution is in its outlining of the
importance of opportunistic behaviour by certain professionals in internalizing the Internet’s
network externalities
JEL Code/Keywords:
JEL Codes: L96, L86, O33
Keywords: broadband, medical applications, policy, interorganizational, telemedicine, budget
ICT II 1.2
AN ECONOMIC EVALUATION OF THE JAPANESE TELEHEALTH SYSTEM BY CVM:
COMPARISON OF FOUR REGIONS
Authors: Masatsugu Tsuji, Wataru Suzuki, Osaka University, Japan
Fumio Taoka, Kyoto University of Education, Japan
The telehealth system is a type of telecare, which transmits health-related data of its users such
as blood pressure, ECG, and blood oxygen to a remote medical institution via a
telecommunications network. Eighty Japanese local governments are already implementing
such systems, utilizing a total of more than 10,000 devices. This paper analyzes the economic
benefits of the telehealth system in the following four regions in Japan: Kamaishi City, Iwate
Prefecture; Nishiaizu Town and Katsurao Village, Fukushima Prefecture; and Sangawa Town,
Kagawa Prefecture. The Contingent Valuation Method (CVM), which has been recently
widely adopted in the fields of Environmental Economics and Health Economics to measure
the benefits of services which are not traded in the market, is used. We conducted a survey of
348 users in Kamaishi City on their Willingness to pay (WTP) to use the service. According to
their WTP, we estimate the demand function of the system, which is assumed to be a logistic
curve. The average amount of WTP calculated is 4,519 yen (approximately US$37). We then
compare the benefits with the costs of the system, which consists of equipment, salaries of
doctors and nurses, and other operations. The ratio of benefits over costs (B/C ratio) is about
1.07, which implies that the system of Kamaishi City yields more benefits than costs. This is a
rather surprising result when viewed in comparison with the systems of other regions. The
paper also analyzes how the benefits expressed in terms of WTP are attributed in exact
monetary terms to factors such as (a) less anxiety in day-to-day life, (b) stabilization of illness,
(c) enhancement of health consciousness, and (d) decrease in medical expenditures. The
parties bearing the costs of the system are identified, namely, the amounts paid by individual
users and public fund such as tax and medical insurance. Thus, this paper suggests
reimbursement to the telehealth system using medical insurance.
JEL Code/Keywords:
JEL Codes I11, H43, C93
Keywords Telehealth, CVM, WTP, B/C ratio, reimbursement
ICT II 1.3
CHALLENGES OF SUSTAINABILITY AND RESPONSES IN ICT SECTOR
Authors: Mária Vágási, Árpád Jankò, Budapest University of Technology, Hungary
Enterprises — small, medium sized or big ones as well as national or global ones —
continually seek for actual sources of competitiveness. In matter of competitive advantages
management theories stress on the importance of focusing on customer need satisfaction.
Recent marketing paradigms based on seeking for better customer satisfaction involve three
main „winner” orientations: consideration of social expectations, delivering value to customers
and building partnership with key customers. In situations of strategic decision making
enterprises usually face the dilemma whether adoption of these orientations will actually
contribute to achievement of profit goals or in what conditions may they be profitably
employed.
Nowadays more and more companies outsource their business functions and operations.
Organizations are increasingly depending on business network in which they are embedded.
The importances of networks are increasing while the coordination of networks became more
difficult. We try to find answer is there coordinator function -within lengthy network in ICT
industry- which is able to force partners to take into consideration the sustainability issues in its
everyday operation.
Experiences show that customer retention is cheaper than acquisition of more new customers.
Loyal customers are ready to buy more products or services from the preferred company and
often become their „advocates”. They appreciate individual and social value delivering, benefit
sharing and are often ready to pay even premium prices. Companies strive to find a balanced
cost/benefit relation in satisfying high expectations of key customers. Mutually profitable
partnership that embodies the highest level of sustainable customer relationship may occur in
value chains of network organizations. But direct actors/stakeholders of this relationship —
suppliers, fabricants or service providers, intermediaries and customers — are both partners
and concurrents. It is important to analyze how interest for sustainability emerges and will be
diffused in the value chain from cradle to grave.
The paper explains a more detailed theoretical background of the sustainability concept
(triple bottom line) within Information and Communication Industry based on authors
research performed in the framework of Technology Management Ph.D. education
program.
CM - COMPETITION IN MOBILE TELECOM INDUSTRY: JOINT EARIE-ITS SESSION
CHAIR : MS.SEIM
CM 1.1 069
ROAMING IN THE MOBILE INTERNET: WHEN COMPETITION OVER COVERAGE ASKS FOR
REGULATION
Author: Simona Fabrizi,Bruno Wertlen, University of Toulouse, France
We examine competition in Mobile Internet services, when operators can cross-access each
other's networks and pay in exchange a reciprocal roaming charge. Competition between
operators over coverage gives rise to a continuum of equilibria which all guarantee the entire
coverage of the available territory at least by one of the two operators. We show that not
duplicating the coverage of the territory provides extra-rents to operators that come from the
roaming revenues. The control over a minimum coverage requirement, or the level of the
roaming charge itself could be valid tools for the regulatory agency to avoid such types of
equilibria to occur.
CM 1.2 320
PRODUCT MARKET COMPETITION AND LOBBYING COORDINATION IN THE U.S. MOBILE
TELECOMMUNICATIONS
Author: Astrid Jung, Tomaso Duso, Science Center Berlin, Germany
This paper investigates coordination of firms in their lobbying activities and the
interrelationship between lobbying cooperation and product market competition in the U.S.
Cellular Services Industry. We base the estimations on a theoretical model where firms direct
their financial contributions to politicians in order to lobby for a higher price-cap and for cost
reducing measures. We derive a measure of coordination in lobbying which we then estimate
and test. Furthermore, we identify the link between market coordination and lobbying
expenditures and test whether firms perceive the policy choice as a public or a private good.
CM 1.3 438
THE COMPETITIVENESS OF MOBILE TELECOMMUNICATIONS INDUSTRY ACROSS THE
EUROPEAN UNION
Author: Lukasz Grzybowski, CINE, University of Munich, Germany
This paper investigates the competitiveness of mobile telecommunications industry across the
European Union in years 1998-2001, based on the structural model estimation. The estimation
results allow to conclude, that the competitiveness of mobile industry depends strongly on the
progress in implementation of the market regulation. The differences in market
competitiveness and industry growth across the EU countries result from unlike
telecommunications policy regarding the licensing, market supervision, timing of market
liberalization and the implementation of key competition enablers such as number portability.
Moreover, the mobile industry is strongly influenced by the developments on the market of
mainline telephony.
CM 1.4 505
THE EFFECT OF ENTRY AND MARKET STRUCTURE ON CELLULAR PRICING TACTICS
Author: Katja Seim, Brian Viard, Stanford GSB, USA
We test the effect of entry on the product variety choices of incumbent cellular firms. We relate
the change in the breadth of calling plans between 1996, when incumbents enjoyed a duopoly
market, and 1998, when incumbents faced increased competition from PCS firms. The increase
in competition differed across geographic markets due differences in both the initial number of
allocated licenses and those actually built-out. We find that incumbents increased product
variety more in markets with more entrants and that this effect is not explained by demographic
characteristics of these markets or the geographic scope of the providers' services.
AR I ANTITRUST AND REGULATION ISSUES I: CHAIR MR.CONFRARIA
AR I 1.1
TELECOMMUNICATIONS POLICIES: DETERMINANTS AND IMPACT1
Authors: Jordi Gual, Francesco Trillas, Universitat Autonoma de Barcelona, Spain
This paper presents new data, in the form of four indices, on liberalization policies and the
independence of regulators for a cross section of countries. These indices are combined with a
comprehensive set of performance, institutional and political data to analyze both the
determinants and the impact of telecommunications policies. We find that liberalization
policies are negatively associated with the degree to which countries have an interventionist
tradition, but not with the partisan ideology of reforming countries per se. We also find that
countries where the institutional endowment constrains less the behaviour of the executive
bodies, and countries with a stronger incumbent, are more prone to create truly independent
regulatory agencies. There is weak evidence that the creation of independent regulatory
agencies has a positive effect on network penetration when we take into account the
endogeneity of regulatory independence.
JEL Code/Keywords
JEL Classification: L96, L32, F21
Keywords: telecommunications, liberalization, institutions.
.
1 We
thank Sandra Jódar for excellent research assistance. Support from the Research Centre “Public
Sector Private Sector” at IESE Business School is gratefully acknowledged. We also thank Lars-Hendrik
Röller, Jordi Jaumandreu, Joan Ramon Borrell, Daniel Montolio and Astrid Jung for their detailed
comments. The paper also benefitted from discussions at a CEPR Workshop in Madrid, at the I
International Industrial Organization Conference in Boston, at the Universitat Autònoma de Barcelona,
and at the Barcelona Workshop on Industrial and Public Economics (Institut d’Economia de BarcelonaUniversitat de Barcelona).
AR I 1.2
STRATEGIC MEASURES WITH ANTI – COMPETITIVE EFFECTS
Author: Flemming Dehn Jespersen, MCI, Regulatory Director Interconnection, Denmark
CN II CONTENT AND NETWORKS II: CHAIR MR. PFANNHAUSER
DISCUSSANT: MR. FETSCHERIN
CN II 1.1
COMMUNICATIONS REGULATION IN THE AGE OF DIGITISATION AND CONVERGENCE
Author: Harald Pfannhauser, USC, Austria
Two schools of thought prevail in discussing the nature of media markets. One tends to be
preoccupied with the prevention of harm, the promotion of public interest and sees the
individual primarily as citizen and part of an inactive collective that needs guidance and
protection from commercial media companies. The other qualifies the individual rather as a
consumer, who is well aware of the choices he makes and actively looks for information and
entertainment - which leads to the functioning of markets being the prime regulatory
prerequisite. It is in my view impossible to reconcile these two conflicting views, but it is
important to consider them when talking about regulation and its motives.
I argue that with the introduction of the internet, a paradigm shift has taken place from the
supposedly passive consumer of television to the active netizen of the cyberspace 18. This shift
has also to be taken into account within the legal framework of these markets, which is why I
stress the need for less sector regulation and a greater degree of competition policy. Lessig
underlines this argument by referring to the regulation of cyberspace as a moral, ethical and
political question: …politics is that process by which we collectively decide how we should
live19.
Under the increasing influence of digitisation and convergence, a gradual merger of regulatory
units should be combined with a shift from sector regulation to general competition law.
Not two conflicting set of rules, but one general competition law will prevail and give markets
legislative checks and balances they have to acknowledge without imposing undue
administrative and financial burdens.
By merging telecommunications and media regulation in Austria and the UK, politicians
acknowledge that the same set of rules and regulations can be applied to both markets. Given
the fact that the media market was always regarded as somehow different and sensitive, this
signifies a return to the normality of free market economics.
That in turn means that the media market, with increasing competition, is losing his specific
necessity for being treated and regulated differently than any other market. Regulatory
convergence therefore points towards an end of its specific regulation rather than to its limits.
Issues like plurality of media sources and diversity of content can be taken care of by general
law and supervised by the respective governmental departments, as the first and foremost
guardian of public interest can only be the law made by accountable and responsible
politicians.
This paper introduces arguments for sunset regulation in the convergent telecommunications
and media sector and advocates a gradual handover from sector specific regulation to general
competition law. It draws on the examples of KommAustria in Austria and OFCOM in the UK,
both of which are or will be convergent telecom and media regulators.
Furthermore the concept of sunset regulation is introduced, the Hotelling effect is adapted to
support its case and the digital paradigm shift serves as the overarching principle of change for
a combined telecom and media industry.
JEL Code/Keywords:
Keywords:digitisation – convergence – media regulation – competition law
18
19
See: http://www.ccp.ucla.edu/pages/internet-report.asp, p32, 76-78, accessed December 4th 2001
Lawrence Lessig, Code and other laws of cyberspace, Basic Books, New York, 2000, p59-60
CN II 1.2
THE ECONOMICS OF IDEAS AND EXPRESSIONS:
ANALYSIS OF SCOPE AND UTILITY IN SOFTWARE INTELLECTUAL PROPERTY
RIGHTS
Author: Elad Harison, Maastricht Economic Research Institute on Innovation and Technology, NL
The evolution of technical knowledge and its economic role as a production resource that
provides substantial inputs for innovation and, at the same time, compounds major shares of
output, strike economists and academic scholars in different industrial and technological fields.
As technical changes proceed, so do technological landscapes in which various genres of
knowledge are implemented and merged.
Ideas and expressions are both significant resources for utilizing existing know-how in new
products and technologies. Although the distinction between idea and expression is often
vague and open to wide interpretations, it embraces fundamental and extensive implications
than those included in recent academic studies.
Economists, striving to establish a profound frame-of-reference to classify diverse classes of
knowledge and different modes of its production and organization, agree that ideas and
expressions stimulate development of new technologies and markets. Yet, both are separate
schemes of know-how. Therefore, frameworks that pursue the analysis of knowledge and its
dominant role in the economy as well as its derived implementations (e.g. the evaluation of
innovation policies) may reflect only a limited outlook in their agenda if ideas and their
expressions are taken as a single entity.
While scholars struggle to find economic epistemology that represents adequately the
formation and the “behaviour” of knowledge, policy makers have already taken advanced steps
in attempt to resolve this issue by legal means. Legally, an “idea” is perceived as an invention,
or as a novel contribution to a technical field and hence it is patentable, while on the other
hand, an “expression” includes variety of literary and artistic works for which copyright
protection is granted to the originals and to their derivatives. By implementing policies that
distinguish between patentable and copy-protected products, a clear dichotomy between ideas
and expressions was defined. Although this distinction seems sufficient for addressing the
needs of technology-oriented sectors and cultural industries, this may not be the case when
knowledge-based products are considered.
The debate on IPR (intellectual property rights) protection for software technologies imposes a
set of fundamental issues on the economic nature of software and the computational processing
of digital inputs, which essentially had not been widely raised since the introduction of the
computational machines. Therefore, an historical perspective on the development of
computation, first as a single-task machinery, employed to calculate a single mathematical
function or a limited sequence of steps and later the development of the Universal Machine, the
digital computer, to perform multi-computational tasks, is used to illuminate the distinction
between “instructions” (i.e. software) and “machine” (i.e. the digital computer) and to clarify
whether physical machines built to perform certain computational tasks should be granted
patents in terms of increasing innovation and social welfare, while the success of patents and
copyrights granted to the digital equivalents, i.e. computer programs, to guarantee the same
goals is put to a continuous debate.
While both patents and copyrights are generally criticized as over-protective, providing
monopoly over technologies and cultural goods for long periods, software adds unique and
complex dimensions to the debate, since, different from any other technology, its products are
protected by both patents and copyrights. Hence, when one examines each legal regime
separately rather than evaluates their cumulative effects, the analysis would reflect only limited
fragments of their impact on innovation and technical change.
Of a particular interest is the evolution of IPR policies taken to classify ideas and expressions
and, more generally, the common perceptions of technical know-how among legislators and
courts. Those are illustrated by Court’s decision in Whelan v. Jaslow, a statutory keystone in
defining software as intellectual property. The case has not only included recently developed
intangibles within the definition of property and in the scope of its protection, but also
revolutionized long-living perspectives on the distinction between expressions and ideas,
which had already become solid for traditional technologies. Yet, the case was only a
milestone within a stationary course of jurisdiction and IPR policies that formed the borders
between idea and expression in knowledge-intensive products on a case-by-case basis rather
than through a broad inquiry and versatile regulation. Consequently, the following legal
doctrines significantly extended the scope of copyrights for computer programs by including
components of operability and design intrinsic to the technology in their scope, leaving
software algorithms in the domain of patentable subject matter.
The article discusses the role of ideas and expressions in development of new products and
technologies and their different impact on innovation and technical change. It compares their
economic merits and dissimilarities in the general episode of physical goods, such as
machinery, and in the more peculiar case of intangibles through analysing the protection of
computer programs.
The extension in the scope of IPR of software products and technologies has blurred the
traditional dichotomy between idea and expression and re-shaped the borders between patents
and copyrights and a consequent overlap between both regimes has followed. We highlight
often-disregarded aspects and systematic inefficiencies that may rise from the emerging
legislative guidelines regarding protection of ideas and expressions as intellectual assets and
assess their economic impact on technological progress and innovation in computer
technologies.
JEL Code/Keywords:
JEL Codes: L86, O31, O34
Keywords: technical knowledge; innovation; ideas and expressions; intellectual property rights;
information technologies
DS DEMAND STUDIES. CHAIR MR. KUBASIK
DISCUSSANT: MR PEREZ AMARAL
DS 1.1
Price Elasticity of Fixed to Mobile Calls
Authors: Momin Hayeek,BT Analysis Forecasting, UK
Introduction
Since the introduction of pre-paid mobile phones in 1998 there has been a significant increase
in the number of calls made both to and from
mobile phones. Total call minutes from
mobile phones (to Fixed [FtM] and to Mobile
[MtM]) has grown by an average rate of 47
per cent over the last 5 years. Call minutes
from fixed to mobile (FtM) phones grew by
an annual average rate of 37 per cent over the
same period.
The growth in FtM minutes has tracked the
growth in mobile subscribers’ base. The
recent slight decline in FtM calls is due to
MtM substitution as off-net MtM calls are
increasingly included in mobile price plans
Figure 1: FtM minutes , number of handsets,
bundled minutes.
900
60,000
Minutes
800
Subscribers
600
40,000
500
30,000
400
300
20,000
subscribers ('000)
minutes ('000 000)
50,000
Price
700
200
10,000
100
Jan-03
May-03
Sep-02
Jan-02
May-02
Sep-01
Jan-01
May-01
Sep-00
Jan-00
May-00
Sep-99
Jan-99
May-99
Sep-98
Jan-98
0
May-98
0
price per minute
Recent situation
The total market is still growing but the rate has slowed significantly indicating that a
saturation level is gradually being reached. Pre-paid phones, which account for 71% of
residential handsets, have been the main growth driver in the last few years. Post-paid contracts
account for roughly a third of total
subscribers and have been growing with a
constant and relatively low rate, typical of a
mature market.
This has been confirmed by Oftel, which
recently defined the mobile market as being
in the mature stage. Significant changes in
subscriber base are therefore not expected,
however usage patterns are likely to
fluctuate.
Elasticity Estimation
Estimating the price elasticity of FtM, while
Figure 2: Mobile subscribers’
having such a close relationship between
growth
FtM minutes and handsets is difficult.
The considered model is a set of equations with the variables:
- Handsets
- Price per FtM minute
- Economy variable (real GDP for Business customers, Household Income for Residential; or
other similar e.g. FTSE index for Business)
Analysis was based on a pooled time-series cross sectional model. The model data used was
monthly data on calls to the four mobile UK operators, in the period January 1998 to May
2003. The data was also split by Business/Residential customer base.
An additional split for pre and post paid mobile subscribers level was rejected due to the lack
of data from mobile operators. A proxy split for pre and post paid customers using empirical
60,000
Pre-paid
Post-paid
40,000
30,000
20,000
10,000
Jan-03
Sep-02
Jan-02
May-02
Sep-01
Jan-01
May-01
Sep-00
May-00
Jan-00
Sep-99
May-99
Jan-99
Sep-98
Jan-98
0
May-98
subscribers ('000)
50,000
data splits of FtM minutes was also rejected because of significant changes in subscriber usage
patterns.
The generic equation used in the model:
ln( Minutes x , y , z )   x , y , z   x , y , z ln(Pr ice x , y , z )   x , y , z ln( Subscriber s y )   x , y , z ln( GDP)   x , y , z
where:
x - represents Type of BT Fixed line customer [Business/Residential].
y - Mobile Operator [Vodafone, T-mobile, MMO2, Orange].
z – Time of Day [Daytime, Evening, Weekend]
Thus, β x,y,z is the estimator for price elasticity for calls from x customers to y operator during
z time of day.
The model analysis resulted in set of 24 independent equations at the most detailed level.
However, all operators are in a common market and therefore have some degree of
interdependency. Thus one should expect some correlation amongst the error terms ε x,y,z and
therefore use an appropriate estimation method such as Seemingly Unrelated Regression
Equations (SURE) to account for this.
The system of equations used was pooled on Customer type and Time of Day, since a
customer, in general, is unaware of the price of calling a particular mobile network. The
resulting model consists of 6 equations.
An alternate method is to estimate elasticity by constructing a fully pooled model where the
coefficients are unified across all operators. The problem with this approach is that it imposes
severe restrictions on the coefficients and will produce a statistically poor result.
An additional iteration was analysed with the inclusion of a lagged price variable, of up to two
periods, to allow for the delay in customer awareness in price change.
Results
Applying both independent and simultaneous set model, where results were significant and
with a high R Square, has given estimates of a price elasticity of between <-0.05> and <-0.40>
depending on time of day and type of customer.
Conclusion and direction for further studies
The estimates obtained of overall elasticity in range <-0.05> to <-0.40> are generally in line
with other analysis carried out in this area.
This approach used aggregated information on the price of the FtM call, handsets and FtM
minutes. Obviously customers even within business/residential split have different usage
patterns i.e. some make very few FtM calls while making lots of FtF calls, some may make
exclusively FtM calls. Consequently more accurate estimates of elasticity could be achieved if
customers were separated into homogeneous sub-groups according behavioural characteristics
and analysis carried out on these sub groups.
Using billing information would lead to more behavioural link to FtM minutes. Customers in
general tend to be not aware of all different FtM prices, but are highly aware of the amount on
their monthly bills. This situation can lead to a delayed behavioural shock effect (“bill shock”)
contrary to the situation when the price is known and customer knows in advance how much
will the call cost.
Further modelling analysis is expected to show high bill elasticity while the model considered
above resulted in low price elasticity.
DS 1.2
Estimating the Demand for National Long-distance Calls-Case Finland
Author: Tom Björkroth, Åbo Akademi University, Finland
Demand studies in telecommunications have focused on two primary areas. The first group of
studies is concerned with modelling access demand and the second group of studies has
focused on usage. Estimates of usage demand, and especially of the price elasticities, are useful
for regulatory authorities in determining welfare implications in the context of tariff
restructuring. Contributions on estimating the demand for usage are based on either panel or
time-series data and some authors do report estimates using both types of data sets. There does
not seem to be a systematic difference in estimated elasticities depending on how the data is
structured. The elasticities seem rather to vary more according to the length of the haul than
according to the time of day in which the call is being made. With few exceptions,
Scandinavian contributions are rare. These results suggest that the price elasticity vary
substantially with the area of origination, reaching absolute values from 0.12 to 0.74.
This paper makes an attempt to estimate demand functions for domestic long-distance calls, in
order to estimate price and income elasticities of this service. The study employs aggregate
annual data between 1950 and 2001. The results are used to approximate changes in total
surplus from adjustment in prices in from 1999 to 2000.
In the estimation stage this study, in contrast to most of the earlier contributions, controls for
the collinearity between income and the number of main connections. Corrections for the
autocorrelation in the model were also required. The results support the stylised fact that price
elasticity varies with the price. The price elasticity for the average price was –0.18, which is
less than for many other time series studies, but in line with the findings in Pérez-Amaral et al.
(1995) and Garín-Muñoz (1996). In contrast to earlier contributions regarding Finland, models
with constant price elasticity did not appear relevant. The income elasticity in equals unity,
which suggests that long-distance calls verge on being a luxury good.
The welfare effects of the price increase in late 1990s seem to have been moderate, which
partly results from the small size of this particular market.
Most relevant bibliography:
Das, P., and P. V. Srinivasan (1999) ‘Demand for Telephone Usage in India.’ Information Economics and
Policy, 11, pp. 177-94.
Draper, N. R., and H. Smith (1980) Applied Regression Analysis. John
Wiley & Sons
Garín-Muñoz, T. (1996) ‘Demand for National telephone Traffic in Spain from 1985-1989: An Econometric
Study Using Provincial Panel Data.’Information Economics and Policy, 8, pp. 51-73.
Pérez-Amaral, T., F. A. González, and B. Jiménez (1995) ‘Business Telephone Traffic Demand in Spain:19801991, an Econometric Approach.’ Information Economics and Policy, 7, pp. 115-34.
Taylor, L. (1994) Telecommunications Demand in Theory and Practice. Kluwer
JEL Code/Keywords:
Keywords Telecommunications, demand, elasticities, welfare
:.
3. Trends and Lessons learned in European Liberalization
 Appropriate regulation guidelines have to be very well prepared to facilitate the
appropriate results in the market.Experience showed different levels of “strictness” of
NRA´s with correlating effects on incumbents’ performance.The resulting increased
competition led to a drop in telephone pricesOne example is the German
Telecommunications Act of 1998 which led to lower cost for customers but on the
other hand to a difficult situation for operators in the market.Before debating a new law
it will be necessary to discuss the future telecommunication politics.Experiences from
the German liberalized market
1998 – 2002Key elements of the draft of the amendment of the German
Telecommunications Act
 Political objectives of the law
 Market analyze and limitation
 Regulation of product fees
 Advantage for infrastructure competition versus service-competition
 Regulation of new markets
 Frequency politics
 Influence to the economic and employment-development
5. First lessons learnt from the debate in German Bundesrat (House of the States)
and Parliament
 The comments will be decided probably in July, 2003
6. Different positions of the incumbent and the competitors
7. Conclusion and political outlook
CLOSING SESSION:
INNOVATION, COMPONENTS AND COMPLEMENTS
Author: Hal Varian, UC Berkeley, USA
LIST OF PARTICIPANTS (registered until 08-15-03)
Last Name
First Name Institution
Country
Budapest University of
Arpad
Janko
Technology
Hungary
Michigan State
Bauer
Johannes University
USA
Björkroth
Tom
Abo Akademi
Finland
Chalmers University of
Bohlin
Erik
Technology
Sweden
Edward Elgar
Broom
Joanne
Publishing
UK
University of
Calzada
Joan
Barcelona
Spain
Cava Ferreruela Inmaculada Fujitsu Espania
Spain
London Business
Curry
Richard
School
UK
Malta
Communications
Cuschieri
Joseph
Authority
Malta
Aston Business
Daßler
Thoralf
School
Uk
Dognin
Elisabeth
France Telecom
France
Falch
Morten
CTI
Denmark
Institution Government
Falcone
Andrew
of Canada
Canada
Universidad
Feijóo Gonzales Claudio
Politecnica de Madrid Spain
Fetscherin
Marc
Universität Bern
Switzerland
Flacher
David
ENST
France
Detecon International
Fredebeul-Krein Markus
GmbH
Germany
Fuke
Hidenori
Kansai University
Japan
Competition
Garthwaite
Nicholas
Commision
UK
Gatti
Gómez Barroso
Groebel
Gual
Marco
José Luis
Annegret
Jordi
Hagen
Kare P.
Harison
Elad
Haucap
Hayashi
Hazlett
Justus
Kenta
Thomas
Heng
Stefan
Henten
Anders
Federal Office for
Communications
(Swiss Gevernment) Switzerland
UNED
Spain
RegTP
Germany
IESE Business School Spain
Norwegian School of
Economics
Norway
Merit Maastricht
University
NL
University of the
Federal Armed Forces
Hamburg
Germany
Konan University
Japan
Manhattan Institute
USA
Deutsche Bank
Research
Germany
Center for TeleInformation
Denmark
email
arpy@sch.bme.hu, arpy@ax.hu
bauerj@msu.edu
tobjorkr@abo.fi
erbo@mot.chalmers.se
hnicholls@e-elgar.co.uk
calzada@eco.ub.es
epmesa@mail.fujitsu.es
rcurry@london.edu
jcuschieri@mca.org.mt
dasslert@aston.ac.uk
elisabeth.dognin@francetelecom.com
falch@cti.dtu.dk
falcone.andrew@ic.gc.ca
claudio@gtic.ssr.upm.es
fetscherin@iwi.unibe.ch
markus.fredebeul-krein@detecon.com
hfuke@gakushikai.jp
nicholas.garthwaite@cicerostrategy.com
marco.gatti@bakom.admin.ch
jlgomez@cee.uned.es
annegret.groebel@regtp.de
gual@iese.edu
kare.hagen@nhh.no
e.harison@merit.unimaas.nl
justus.haucap@unibw-hamburg.de
khayasi@konan-u.ac.jp
twhazlett@yahoo.com
stefan.heng@db.com
henten@cti.dtu.dk
Hudson
Heather
Jamison
Jones
Mark A.
Lee
Jong-Hyun
Park
Just
Kaliski
Kavanaugh
Natascha
Oliver
Andrea
Kefala
Kim
Kosa
Kruse
Kubasik
University of San
Francisco
USA
Public Utility Reserach
Center
USA
Vodafone Group
UK
Electronics and
Telecommunications
Reseacrh Institut
ICE-Austrian
Academy of Sciences
Mobilkom
Virginia Tech
hudson@usfca.edu
jamisonma@ufl.edu
lee.jones3@vodafone.com
Korea
pjh63444@etri.re.kr
Austria
Austria
USA
njust@oeaw.ac.at
a.heimberger@mobilkom.at
kavan@vt.edu
Athens University of
Economics and
Anna
Business
Greece
Jae-Kyung Korea Telecom
Korea
Communications
Zsuzsanna Authority of Hungary Hungary
Universität der
Jörn
Bundeswehr Hamburg Germany
Poznan University of
Jerzy
Technology
Poland
anna@aueb.gr
kjkyung@kt.co.kr
kosa@hif.hu
joern.kruse@unibw-hamburg.de
jkubasik@et.put.poznan.pl
Regulierungsbehörde
f Telekommunikation
und Post
Germany
kuebler-bork@regtp.de
ICE-Austrian
Academy of Sciences Austria
latzer@oeaw.ac.at
Kübler-Bork
Kuhlmann
Annegret
Federico
Latzer
Michael
Lee
Information and
Commnuication
Seunghwan University
Korea
lsh@icu.ac.kr
Lee
Dong Hee
Information and
Communication
University
Korea
dkrehddl@icu.ac.kr
Lindmark
Loebbecke
Longstaff
Marsden
Marsden
Sven
Claudia
Patricia
Richard
Christopher
Merdian
Mikula
Mölleryd
Momin
Nandi
Nett
Neumann
Nyström
Ostgard
Ouli
Perez-Amaral
Chalmers University of
Technology
Sweden
Univesity of Cologne Germany
Syracuse University USA
DotEcon Limited
UK
Metropole Institut
Spain
Lambda Net
Communications
Georg
GmbH
Germany
Thomas
RTR-GmbH
Austria
Bengt
Evli Bank
Sweden
Hayee
British Telecom
UK
Banani
AT&T Shannon Labs. USA
Lorenz
WIK GmbH
Germany
K.H.
WIK GmbH
Germany
Abo Akademi
Anna-Greta University
Finland
Rune
European Commision
Maria
UK
Universidad
Teodosio
Complutense
Spain
svelin@mot.chalmers.se
claudia.loebbecke@uni-koeln.de
phlongst@syr.edu
richard.marsden@dotecon.com
ctmarsden@yahoo.co.uk
georg.merdian@lambdanet.net
reisestelle@rtr.at
bengt.molleryd.evli.com
momin.hayee@bt.com
ban@homer.att.com
l.nett@wik.org
k-h.neumann@wik.org
anna-greta.nystrom@abo.fi
rune.ostgard@cec.eu.int
maria.ouli@kcl.ac.uk
teodosio@ccee.ucm.es
Preissl
Brigitte
Ramos Villaverde Sergio
Reynolds
Rothmueller
Ruhle
Sasaki
Schmitz
Schnepfleitner
Simon
Stappen
Staudinger
Sung
Szabo
Tabori
Tyrväinen
Paul
Petra
DIW
Universidad
Politecnica de Madrid
Charles River
Associates
Telekom Austria AG
Germany
bpreissl@diw.de
Spain
sramos@gtic.ssr.upm.es
UK
Austria
preynolds@crai.co.uk
petra.rothmueller@telekom.at
Rechtsanwälte
Piepenbrock und
Ernst-Olav Schuster
Germany
InfoCom Research
Tsutomu
Inc.
France
Autrian Academy of
Stefan
Sciences
Austria
Rainer
Swisscom AG Bern
Switzerland
Jean-Paul France Telecom
France
Cornelia
WIK GmbH
Germany
Michael
Univesity of Cologne Germany
Nakil
University of Seoul
Korea
Infrapont Consulting
Erika
Ltd
Hungary
Budapest University of
Economics and Public
Administration,
INFRAPONT
Tama's
Consulting
Hungary
University of
Pasi
Jyväskylä
Finland
Vagliasindi
Maria
van Wegberg
Vanberg
Marc
Margit
Vesa
Jarkko
European Bank for
Recostruction and
Development
University of
Maastricht
ZEW Mannheim
Helsinki School of
Economics
tsaki@club-internet.fr
stefan.schmitz@oeaw.ac.at
rainer.schnepfleitner@swisscom.com
jeanpaul.simon@francetelecom.com
c.stappen@wik.org
michael.staudinger@uni-koeln.de
nisung@uos.ac.kr
szaboe@infrapont.hu
ttabori@infrapont.hu
pasi.tyrvainen@jyu.fi
UK
vagliasm@ebrd.com /
smithca@ebrd.com
NL
Germany
m.vanwegberg@os.unimaas.nl
vanberg@zew.de
Finland
jarkko.vesa@luukku.com
France
Austria
pierre.vialle@int-evry.fr
reisestelle@rtr.at
UK
jason@mansci.strath.ac.uk
Vialle
Weber
Pierre
Jan
Whalley
Jason
Institut National des
Telecommunications
academic
RTR-GmbH
University of
Strathclyde
Yan
Demetrios
Hong Kong University
of Science and
Technology
China
University of Piraeus Greece
Xu
Yannelis
eor@ra-ps.de
xuyan@ust.hk
yannelis@unipi.gr
ABOUT THE ITS
The International Telecommunications Society is a long-standing, independent, non-profit association of
professionals (academics and practitioners in operating companies, consultancies, government agencies) with an
interest in the growing field of telecommunication planning, policy formulation and economic decision analyses.
The aim of this world-wide network of professionals is to systematically encourage distribution of information,
discussions and research concerning telecommunications issues, legislative and policy decisions.
The ITS consists of approximately 400 individual members, corporate members and a Board of Directors.
A conference committee organizes conferences and meetings.
ITS contacts
Chair: Dr. Loretta Anania
ITS Board of Directors
European Commission - DG XIII
Rue de la Loi
B-1049 Brussels
Tel: +32 2 296 3491,
Fax: +32 2 295 6937
Email: Loretta.Anania@cec.eu.int
Logistics support:
Suzanne Chambliss Neil
Phone & Fax: +(1) 207-372-6241
chambliss_neil@yahoo.com
Vice-Chair: Dr Erik Bohlin
ITS Board of Directors
School of Technology Management &
Economics
Department of Innovation Engineering and
Management
Chalmers University of Technology
S-41296 Gothenburg,SWEDEN
Phone:+46 (31) 772 1205
Fax:+46 (31) 772 1917
Home Phone:+46 (31) 693 477
Mobile
+46 703 693 478
e-mail: erik.bohlin@mot.chalmers.se
Treasurer: Leland Schmidt
ITS Board of Directors
Alpine Drive
Gilford NH 03249
USA
Phone:+1 603-293-409433
Fax: +1 603-293-4095
e-mail: lschmidt@metrocast.net
Secretary: Susan Simon, Esq.
ITS Board of Directors
Simon & Simon
787 Route 35
Box 273
Cross River, N.Y. 10518
Tel: +1 914 763 8831, Fax: +1 914
763 8693
Email: Ssimonesq@aol.com
European´Regional
Conference Coordinator:
Dr. Jürgen Müller
ITS Board of Directors
Berlin School of Economics
Badensche Str. 50-51
D-10825 Berlin
Tel: +49 30 85789-145,
Fax: +49 30 85789 199
Email: jmueller@fhw-berlin.de
For information on ITS and ongoing European events, please check our website:
http:// www.ITSEurope.org
ITS BOARD COMMITTEES – MAY 2002
Strategic Planning:
Glyn Williams (chair)
Tom Spacek, Noemi Wachtel, Cristiano Antonelli , Frank Kiss, Lorenzo Pupillo
Conference & Seminars
Gerard Pogorel ( chair)
Fernando Gallardo, Don Lamberton, Georgette Wang, Jae-Cheol Kim, Juergen Mueller,
Publications
Erik Bohlin (chair)
Don Lamberton, Nicolas Curien, Glenn Woroch,, Alain de Fontenay, Karl-Heinz Neumann
Membership & Nominations
Stanford Levin (chair)
Dan Furman, David Allen , Jim Alleman, Susan Simon, Fernando Borio, Gerard Pogorel,
Finance
Lee Schmidt ( Chair)
Walter Richter, Frank Kiss, Bob Olley,
Marketing & PR
Bohdan Romaniuk (Chair)
Noemi Wachtel, Stanford Levin, Juergen Mueller
Note: The Chairman and Vice-Chair and Treasurer are de-facto members of each of these ITS committees, and
must be informed of any committee activities by the committee chairs.
Firm and Country
BT-UK
France Telecom
Telus-Canada
InfoCom
Korea Telecom Korea
SK Telecom
Deutsche Telecom Germany
Danube University-Krems
Germany
Membership
(expiration date)
November 18,
2003
May 9, 2003
September 15,
2003
10-31-03
June 7, 2003
Category
September 26,
2002
December 9, 2002
Global
10-31-03
Global
Global
Global
Global
Global
Society
Members
hip
Institution
al
ITS MISSION STATEMENT
What is ITS
The International Telecommunications Society (ITS) is an association of professionals in the information sector
with the aim of providing a forum where academic, private sector, and government communities can meet to share
research results and problem solutions, identify pressing new problems and issues, and form new relationships and
approaches to address those issues. ITS focuses on the evolving applications, services, technology, and
infrastructure of the converging communications, computing, Internet, information content, and related industries.
The goal of ITS is to further research and analysis of telecommunications issues emanating from the evolution
toward next generation networks and towards a global information society while placing particular emphasis on
the interrelationships among market, economic, technology, legal, regulatory, competitive, organizational, policy,
and ethical aspects of those issues. ITS is an independent, non-aligned and not-for-profit organization with a
worldwide network of about 400 members.
How ITS Achieves its Goals
ITS achieves its goals by providing forums where academic, industrial, and government researchers as well as
industry practitioners, policy makers, representatives of international bodies, and consultants present and discuss
research results, and may interact in spontaneous ways. The most important of such forums is a series of ITS
biennial international conferences. In response to specific needs as they develop, ITS also organizes local and
regional symposia, seminars, workshops, and courses. If requested and found appropriate, ITS may also support - in the form of participation, sponsoring, coordinating, or advising -- other organizations' conferences and events.
ITS encourages and supports the participation of young researchers in its conferences. ITS disseminates research
results and news to its members and to the general public via traditional and electronic means including Info, the
membership journal of ITS, the ITS Newsletter, and the ITS Web site, www.its2000.org.ar.
ITS Areas of Interest
The list below provides examples of current topics of interest to ITS’ members. Areas of ITS interest include
topics which have major impacts on the telecommunications industry. These topics are dynamic as new topics
arise while others become less important reflecting the dynamic and fast pace of change in the industry. This list
of examples is by no means inclusive, and by intent, the topics are not mutually exclusive reflecting different
perspectives on similar issues as well as the complexity of many of these issues. Some of the forward-looking
areas on the following list are also intended to reflect our strategic direction:
(1) The challenges and opportunities for traditional telecom providers in developed and developing countries in
transitioning from their critically important role in voice telephony and its associated infrastructure to an
expanded role in evolving to next generation networks and to a global information society where capacity
requirements for data will far outweigh those for voice. A few examples of the many key issues in this evolution
include:
-
interoperability among heterogeneous network technologies and among applications
quality of service
the role of the Internet Protocol
network infrastructure evolution scenarios
alternative technological and economic arrangements among service providers
pricing structure issues
(2) Application areas which may provide major societal and economic benefits including health care, education,
electronic commerce, intelligent transportation systems, entertainment, advanced interpersonal communications,
etc.
(3) Industry structure implications of the emergence of Applications Service Providers.
(4) Evolving infrastructure, services, and applications in industries that are converging, integrating, or competing
with traditional with the telecommunications industry such as the computing, Internet, entertainment, and
information content industry. An example would be the prognosis for Internet Telephony in various market
segments and its impact on traditional telecommunications firms.
(5) Emerging entrants into telecommunications from industries such as electric, gas and water utilities or
transportation companies.
(6) Telecommunications sector transformation
commercialization, and competition.
including
corporatization,
privatization,
deregulation,
(7) Business, technology, and policy issues related to alternative access technologies (e.g., xDSL, cable, wireless
cable, etc.), access appliances (PCs, personal access devices, multi-function wireless phones, Web TV, etc.),
transport technologies, switching/routing equipment, etc.
(8) In all of the above areas of interest, the research and analysis often includes one or more of the following:
- strategic analysis
- demand studies
- competitive analysis
- revenue, cost, and profitability impacts of change
- economy of scale and agglomeration
- analysis of alternative network architectures and technologies
- organizational analysis
- regulatory and policy analysis
In order to adapt to the ever-changing environment in which it operates, ITS periodically reviews the areas of its
interests and activities.
BIENNLAL CONFERENCES
1998
ITS’01 – 14th International Conference in Korea, August 18-21, Seoul, sponsored by Korea Telecom, SK
Telecom & KAPT
ITS’00 - 13th International Conference in Buenos Aires, July2-4 sponsored by Telefonica and
Telecom Argentina
ITS'98 – 12th International Conference in Stockholm, June 21-24, 1998 hosted by Telia
1996
ITS'96 – 11th International Conference in Seville, Spain, June 16-19, 1996 hosted by Telefonica
1994
ITS'94 – 10th International Conference Beyond Competition in Sydney, Australia, July 3-6, 1994 hosted
by Telstra Co.
ITS'92 – 9th International Conference Telecommunications Bridge to the 21st Century in Sophia
Antipolis, France, June 14-17,1992 hosted by France Telecom under the patronage of the France
Telecom University
ITS’90 – 8th International Conference: Telecommunications and the Challenge of Innovation and Global
Competition in Venice, Italy, March 18-21, 1990. Hosted by SIP - Societa Italiana per l’Esercizio delle
Telecommunicazioni under the patronage of the Commission of the European Communities and the
University of Venice
2002
2000
1992
1990
1988
1986
ITS’88 – 7th International Conference: Beyond Traditional Telecommunications Boundaries:
Engineering Possibilities and the Market Realities Cambridge (Boston), Mass., June 29-July 1, 1988, cohosted by the Mass. Institute of Technology (MIT) and Bell Communications Research
ITS’86 – 6th International Conference in Tokyo, Japan in December 1986. Note: This was the first
conference held under the new organizations name ITS. It is called the 6 th International Conference to
continue the conference tradition of the for runner organization, mainly run by a group of national
Telcos, on forcasting and planning.
REGIONAL CONFERENCES & WORKSHOPS
2003
ITS Asia-Australiasian Regional Conference, Perth, Australia, 23-25 June 2003
13th ITS European Regional Conference, Madrid, Spain, September 8-10, 2002, hosted by University
Carlos III and the Spanish Ministry of Science and Technology (in association with the 29th EARIE
Conference)
2001
12th ITS European Regional Conference, Dublin, Ireland, September 2-3, Hosted by Trinity College at
the Hamilton Conference Center in association with the 28th EARIE Conference
2000
ITS European Regional Conference,Lausanne, Switzerland,September 9-11, in collaboration with the 27th
EARIE
Meeting
1999
ITS European Regional Conference,Turin, Italy,September 2-4 in collaboration with the 26th EARIE
Meeting
2002
1997 ITS European Regional Conference Leuven, Belgium, August 29-30, 1997, in
collaboration with the 24th EARIE Meeting
1997
1997
1996
1996
1995
1995
1994
1993
1993
1992
1989
1989
1989
1989
1988
ITS’97 - North American Conference: Global Networking’97, Calgary, Canada, June 15-18, 1997
ITS European Regional Workshop on Mobile Telecommunications Services in Berlin, Germany, April 45,1997
ITS European Regional Workshop Vienna, Austria, September 6-7, 1996, in collaboration with the 23rd
EARIE Meeting
ITS European Regional Workshop on Forecasting, Costing and Pricing in Berlin, June 10-11, 1996
ITS European Regional Conference in Juan les Pins, near Nice, France, September 1-3, 1995, in
collaboration with the 22rd EARIE Meeting
ITS’95 – International Symposium: Strategic Alliance & Interconnection: Contributions of Game Theory
to Telecommunications in Denver, USA, January 9-11, 1995 hosted by Telstra Corporation
ITS European Regional Conference in Khania, Crete, September 2-3, 1994, in collaboration with the 21 st
EARIE Meeting
ITS European Regional Workshop (in collaboration with the 20th EARIE Meeting), Tel Aviv, Israel,
September 7-8, 1993
Regional Conference The Race to European Eminence sponsored by Swedish Telecom, Gothenburg,
Sweden, June 20-22, 1993
European Regional Conference (in collaboration with the 19th EARIE Meeting), Stuttgart, Germany,
September 6-7, 1992
Budapest Regional Conference Europe, August 29-30, 1989. Co-hosted by ITS, EARIE and PKI
Research Institute of the Hungarian P&T
Regional Conference North America, Ottawa, Canada, June 18-21, 19989 held at Carleton University
ITS European Regional Meeting in Leuven, Belgium, April 14-15, 1989. held at the University of
Leuven
ITS Asian Regional Forum, Merrijig (near Melbourn), Australia, March 3-8, 1989
European Regional Meeting, Geneva, Switzerland, October 25-26, 1987
MEMBERSHIPS IN THE INTERNATIONAL TELECOMMUNICATIONS SOCIETY
There are three categories of memberships: Individual Membership, For-Profit Corporation Membership and
Non-Profit or Governmental Membership.
A. Individual Membership
Two year membership
$ 200 for 2 years
(reduced student rate: $ 150)
-Subscription to “Communications and Strategies”
-Newsletter : Interconnect
-Discount on registration at ITS Biennial Conferences
-Membership Fee payable directly or at time of registration at an ITS Biennial Conference
B. For-Profit Corporation Memberships (includes PTTs)
Global Membership:
$6,000 per year
-One seat on ITS Board of Directors
-Three individual memberships in ITS (including that for the Board Member)
-Subscription to “Communications and Strategies” for three members
-Newsletter : Interconnect
-Free registration for these members at ITS Biennial and Regional Conferences
International Membership:
$3,000 per year
-One seat on ITS Board of Directors for every two International members, as selected by
the Board of Directors
-One individual membership in ITS
-Subscription to and “Communications and Strategies” for this member
-Newsletter : Interconnect
-Free registration for this member at ITS Biennial and Regional Conferences
Society Membership:
$1,500 per year
-One individual membership in ITS
- Subscription to and “Communications and Strategies” for this member
-Newsletter : Interconnect
-Discount on registration at ITS Biennial Conferences
C. Non-Profit or Governmental Membership
1-100 Employees
$500 per year
-One individual membership in ITS
-Discount on registration at ITS Biennial Conferences
-Subscription to and “Communications and Strategies”
-Newsletter : Interconnect
101 and over Employees
$1,000 per year
-Two individual memberships in ITS
- Discount on registration at ITS Biennial Conferences
- Subscription to and “Communications and Strategies”
-Newsletter : Interconnect
ITS INDIVIDUAL MEMBERSHIP APPLICATION FORM & INVOICE
Date:
Last Name:
First Name:
Address:
City/State:
Postal/ZipCode:
Country:
Phone:
Fax:
E-mail:
Amount Due: US $ 100 .00
Return with payment to:
Leland Schmidt, Treasurer of ITS
33 Alpine Drive
Guilford NH 03249
USA
lschmidt@metrocast.net
Check should be payable to International Telecommunications Society in US $ drawn on a US bank (add
equivalent of $15 if payment is in another currency)
Call for Papers
15th European Regional Conference,
September 5-7 2004, Berlin, Germany
(in association with the 31th EARIE Conference, Sept. 2-5, 2004)
The International Telecommunications Society (ITS) is a non-profit association of
professionals (academics and practitioners in operating companies, consultancies, government
agencies etc.) with an interest in the growing field of telecommunication planning, policy
formulation and economic decision analyses.
We warmly invite you to participate in the 15th ITS European Regional Conference and
encourage research papers in following areas
Telecommunications Regulation,
Role of Telecommunications Infrastructure,
Changes in the Structure of the Telecommunications Industry,
Telecommunication Services
Industrial Policy Issues,
Electronic Commerce,
Convergence among Telecommunications, Broadcasting and Computing and
Telecommunication Services
Papers (in English) should be based on current research. Submissions must be received no later
than March 31, 2004 and should consist of a two-page abstract and a paper of no more than 25
pages.
Even if you do not plan to submit a paper to the conference we hope that you will act as a
discussant or just attend the conference
The more detailed information can be found at the website: www.itseurope.org
ITS European Regional Coordinator: Prof. Dr. Jürgen Müller
c/o Berlin School of Economics (FHW), Badensche Str. 50-51, 10825 Berlin, Germany
tel. +49-30-85789-145, fax +49-30-85789-199, e-mail: jmueller@fhw-berlin.de
for enquieries: ekor@fhw-berlin.de