Mobile Telecom Networks Essay Example | Topics and Well Written Essays - 4750 words

Mobile Telecom Networks - Essay Example Network economics play a vital role in modern economy, which would be greatly diminished if without the existence of transportation, communications, information, and railway networks. Many earlier literatures have analyzed the major economic features of networks, such as Gandal et al. (2000), who studyies the development of CD technology and concludes that the number of CD titles available greatly affects consumers' willingness-to-pay for CD players. Shurmer (1993) uses consumer survey results to analyze network externalities in software by questioning consumers directly about their attitudes towards software standards. Park (2003) studies the role of network effects in the standard war of the video recording systems. ... In contrast, there are very few works on direct network effects, which have been are defined as those generated through a direct physical effect of the number of purchasers on the value of a product. 2. Network effects and mobile telecommunication industry 2.1 Network effects and compatibility In the mobile telecommunication industry, the 2G (second generation) mobile networks are believed to exhibit the direct network effects: the value of a network increases when people can call a larger set of persons. In the presence of such effects, mobile users would prefer to subscribe to the operator with a larger installed base, which offers a more attractive product. , iIn turn, inducing more customers are induced to subscribe to its networks which producinges a yet bigger installed base advantage. and theAccordingly the service providers accordingly tend to compete more aggressively to increase their market share than would otherwise be the case. But However, along with the diffusion of the 3G networks, indirect network effects begin to play an increasing role, since its their usage heavily relies on the available data services. This could be an interesting topic for future studies. Compatibility is one critical factor conditioning the impact of network effects on market outcomes. It is defined as a measure of the extent to which utility derived by users of a given network product is influenced by the number of users of competing network products (Katz and Shapiro, 1985). The incentive for compatibility is subject to depends on the relative sizes of the demands for each competing network goods. When companies have similar installed bases, they make their