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Sponsored by:
Mobile Impact
16 April 2010 :: UC Berkeley
Final Program
NEW: Conference videos available:
Introduction/Mobile Ecosystem: Walled Garden or Commons?:
http://video.haas.berkeley.edu:24874/ramgen/groups/mot/MI2010/MI_1.ra
Keynote Address:
http://video.haas.berkeley.edu:24874/ramgen/groups/mot/MI2010/MI_2.ra
Mobile Impact in Advanced Economies: Economic Welfare:
http://video.haas.berkeley.edu:24874/ramgen/groups/mot/MI2010/MI_3.ra
Growth and Productivity Consequences of Mobile:
http://video.haas.berkeley.edu:24874/ramgen/groups/mot/MI2010/MI_4.ra
Case Studies from Developing Economies:
http://video.haas.berkeley.edu:24874/ramgen/groups/mot/MI2010/MI_5.ra
Plenary Presentation & Discussion:
http://video.haas.berkeley.edu:24874/ramgen/groups/mot/MI2010/MI_6.ra
Conference Program
8:00-8:45 Continental Breakfast
8:45-9:00 Introductions
Glenn Woroch (Executive Director, CRTP, UC Berkeley)
Michael Katz (Director, Institute for Business Innovation, UC Berkeley)
John Mayo (Director, Georgetown Center for Business & Public Policy, Georgetown)
9:00-10:15 Mobile Ecosystem: Walled Garden or Open Commons?
Moderator: Glenn Woroch (Berkeley)
10:15-10:45 Keynote AddressGerald Faulhaber (Wharton) and David Farber (Carnegie Mellon):
Innovation in the Wireless Ecosystem: A Customer-Centric Framework
[abstract]
[paper available]
[presentation available]
Larry Karp (Berkeley) and Jeff Perloff (Berkeley):
The iPhone Goes Downstream: Mandatory Universal Distribution
[abstract]
[paper available]
Ben Hermalin (Berkeley) and Michael Katz (Berkeley):
The Equilibrium Effects of Differentiation through Exclusivity
[abstract]
Jerry Hausman (MIT):
Mobile Phones in Developing Countries
[paper available]
Moderator: Robert Crandall (Brookings)
10:45-11:00 Break
11:00-12:15 Mobile Impact in Advanced Economies: Economic Welfare
Moderator: Scott Wallsten (Georgetown)
Kalyan Dasgupta (LECG) and Leonard Waverman (Calgary):
Oceans Apart: Policy, Competition and Strategic Differentiators Between the U.S. and European Wireless Markets, and Their Impact On Economic Welfare
[abstract]
[paper available]
[presentation available]
Thomas Hazlett (George Mason) and Roberto Munoz (Universidad Santa Maria):
The Impact of New Wireless Broadband Services on Consumer Welfare
[abstract]
[paper available]
Rob Albon (ACCC), Gary Madden (Curtin) and Jeffrey Petchey (Curtin):
On Wireless Telecommunications and Economic Welfare
[abstract]
12:15-1:00 Box Lunch
1:00-2:15 Growth and Productivity Consequences of Mobile
Moderator: Jeffrey Macher (Georgetown)
Harald Gruber (European Investment Bank) and Pantelis Koutroumpis (Imperial College):
Mobile Telecommunications and the Impact on Economic Development
[abstract]
[presentation available]
Herbert Thompson (Ohio) and Christopher Garbacz (Consultant):
Productivity Impacts of Mobile versus Fixed Broadband Use
[abstract]
[paper available]
[presentation available]
Heli Koski (ETLA):
Firm growth and profitability: the role of mobile technology and organizational practices
[abstract]
[paper available]
2:15-3:10 Case Studies From Developing Economies
Jenna Burrell, UC Berkeley’s i-School
Jenny Aker (Tufts) and Isaac Mbiti (SMU):
Mobile Phones and Economic Development in Africa
[abstract]
[paper available]
Michael Ward (UT Arlington) and Shilin Zheng:
The Effects of Competition and Privatization on Chinese Telecommunications
[abstract]
[paper available]
3:10-3:30 Coffee Break
3:30-4:30 Plenary Presentation & Discussion:
Eric Brewer (UC Berkeley): “The Future of Mobile”
Moderator: Annalee Saxenian, Dean, UC Berkeley’s i-School
[presentation available]
4:30-6:30 Reception: Wine & Hors d’oeuvres
Presentation Abstracts
“Innovation In The Wireless Ecosystem: A Customer-Centric Framework”
Gerald R. Faulhaber
Professor Emeritus, Business and Public Policy Dept.
Wharton School and Penn Law School, University of Pennsylvania
David J. Farber
Distinguished Career Professor of Computer Science and Public Policy
Carnegie Mellon University
Abstract
In this paper, we review the wireless industry’s past performance in three dimensions: (i) the rate of innovation; (ii) how competitive the industry is; and (iii) how competitive wireless innovation is. We do so by examining the record of three key layers in the industry’s vertical chain: software applications, devices (handhelds), and the core wireless distribution networks. We find it useful to compare and contrast the wireless ecosystem (including Internet access) with the personal computer/Internet ecosystem, both in terms of innovation and in terms of market structure.
To preview our results: we find that the three segments of the wireless marketplace (applications, devices, and core network) have exhibited very substantial innovation and investment since its inception. Perhaps more interesting, innovation in each segment is highly dependent upon innovation in the other segments. For example, new applications depend upon both advances in device hardware capabilities and advances in spectral efficiency of the core network to provide the network capacity to serve those applications. Further, we find that the three segments of the industry are also highly competitive. There are many players in each segment, each of which aggressively seeks out customers through new technology and new business methods. The results of this competition are manifest: (i) firms are driven to innovate and invest in order to win in the competitive marketplace; (ii) new business models have emerged that give customers more choice; and (iii) firms have opened new areas such as wireless broadband and laptop wireless in order to expand their strategic options.
Having found that all three segments are highly competitive, we ask, where is the market failure? If none, then the principle of customer-centric applies: let customers make the key decisions regarding which products, services, open vs. managed business models, net neutrality, et al. will survive in the marketplace. While there is no shortage of pundits, advocates, lobbyists and academics advising the FCC that it, rather than customers, should be making these decisions and advising the FCC what those decisions should be, a customer-centric FCC must leave these decisions to customers in a competitive marketplace. Should the FCC decide to preempt customers and make choices for them, it follows as does night from day that the result will be (i) less customer choice, and therefore reduced customer well-being; (ii) higher costs for producers and therefore customers; (iii) lower incentives to invest and innovate, harming customers, producers and the American economy. In this case, economics and technology are on the same page: economists advise intervention only in the case of demonstrated market failure, and then only if there is evidence that the intervention will do more good than harm.
The iPhone Goes Downstream: Mandatory Universal Distribution
Larry S. Karp
Department of Agricultural and Resource Economics
207 Giannini Hall
University of California, Berkeley
Berkeley CA 94720
karp@berkelely.edu
Jeffrey M. Perloff
Department of Agricultural and Resource Economics,
207 Giannini Hall,
University of California, Berkeley
Berkeley, CA 94720
jperloff@berkelely.edu
Abstract
February 2010
Apple’s decision to market iPhones using a single downstream vendor has prompted calls for Mandatory Universal Distribution (MUD), whereby Apple would have to sell to all potential vendors. We show that an upstream monopoly might want to use one or more downstream vendors, and society might benefit or be harmed by MUD. However, if the income elasticity of demand for the new good is greater than the income elasticity of the existing generic good, we find that MUD leads to a higher equilibrium price for both the new good and the generic, and therefore lowers consumer welfare.
“The Equilibrium Effects of Differentiation through Exclusivity”
Benjamin Hermalin
Haas Business School
University of California, Berkeley
Berkeley, CA 94720
hermalin@haas.berkelely.edu
Michael Katz
Haas Business School
University of California, Berkeley
Berkeley, CA 94720
katz@haas.berkelely.edu
Abstract
In systems industries, various combinations of components are consumed together in order generate user benefits. In some instances, end users can combine components as they wish. In others, deals among component providers limit the set of available combinations (e.g., a cable company with an exclusive programming arrangement or a game console with exclusive games). The use of exclusive arrangements has been highly controversial. For example, AT&T and Apple Computer's exclusive arrangement with respect to the iPhone in the United States has drawn the attention of Congress and the Federal Communications Commission.
In this paper, we examine the competitive and welfare effects of exclusive arrangements among system components. Specifically, we examine the case of relatively undifferentiated platforms and relatively differentiated applications that run on those platforms. We first show that there is no “one-differentiation-rent theorem.” That is to say that, by entering into exclusive deals, providers of differentiated applications can increase the margins earned by platforms without reducing application margins. We then examine the tradeoff between two broad forces. First, exclusive arrangements limit the ability of consumers to mix and match components, which for a given set of products and prices, reduces welfare. However, exclusive contracts can also affect equilibrium prices and the availability of different components. We show that the exclusive arrangements can increase welfare by increasing the equilibrium number of platforms, which leads to more efficient pricing.
Oceans Apart:
Policy, Competition and Strategic Differentiators Between the U.S. and Europe
Kalyan Dasgupta
LECG Ltd
London, United Kingdom
Leonard Waverman
Dean, Haskayne School of Business
University of Alberta
Calgary Alberta
Abstract
In contrast to widespread perceptions from earlier in the past decade, a reasonably careful reading of data on market penetration, usage, deployment of advanced networks, and usage of advanced data services finds that today, at the very least, the United States does not trail Europe in the mobile telephony arena, and in some areas, enjoys strong leads over Europe. Particularly with respect to the transition from 2nd-generation to 3rd-generation technology, Europe‘s technology choices imposed significant transition costs that have shaped a more cautious European industry today. In common with other authors, we find that the seemingly anomalous use of “mobile party pays” protocols in the U.S. have enabled the U.S. to achieve far higher levels of mobile telephony usage than Europe. The U.S. policy to allow the number of competitors in a given market to be determined via bidding for spectrum has also likely served the market well. We find that the role for centralised policy-making in the mobile arena is likely limited, and that some of the conventional wisdom in relation to the role of standards is probably inapplicable in this arena. The history of the European and U.S. mobile markets offers several interesting examples and contrasts that demonstrate the dangers of attempting to dictate technologies and business models in an effort to stimulate the market. These findings are relevant to current debates regarding the shape of the emerging mobile broadband market.
What Really Matters In Spectrum Allocation Design
Thomas W. Hazlett
Department of Economics & School of Law
George Mason University
Arlington, Virginia USA
thazlett@gmu.edu
Roberto E. Muñoz
Department of Industry
Universidad Técnica Federico Santa Maria
Santiago, Chile
roberto.munoz@usm.cl
April 7, 2010
Abstract
Wireless license auctions have successfully replaced “beauty contests” in many countries. Competitive bidding (1) puts spectrum rights in the hands of the most productive firms; (2) reduces rent-seeking costs; and (3) captures license values for the public, potentially reducing costly tax distortions. Economists and policy makers have embraced auctions but have asymmetrically focused on (3). While it is understood that the creation of monopolies would maximize auction receipts but prove socially inefficient, similar anti-consumer consequences of other policies – including reserve prices, bidding credits, and spectrum allocation delays -- are excluded from cost-benefit calculations. Yet, the overwhelming consumer welfare gains are produced in output (retail services) markets, not by extracting revenues from the sale of spectrum inputs. This fact leads to powerful policy implications, supporting liberal policies that permit market rivals to (quickly) access abundant bandwidth.
On Wireless Telecommunications and Economic Welfare
Rob Albon
Australian Competition and Consumer Commission
Gary Madden
Curtin University
Jeffrey Petchey
Curtin University
Abstract
The advent and continuing development of wireless telecommunications has produced various economic benefits, including as a valuable input to all businesses (e.g., enhanced production coordination in house building) and as a boon to individual consumers. The conceptualisation and estimation of the benefits of wireless require a counterfactual. This can broadly be in terms of either a world without wireless (Jerry Hausman has, for example, taken this approach in assessing the effects of delaying the introduction of wireless telecommunications) or a situation of smaller and more expensive wireless. We take the latter approach in assessing the impact of price reductions, taking into account both the direct impact in terms of Hicks’s compensating variation (CV) and the indirect effect on other subscribers from subscription growth. For 1996 to 2008, we have collected data from the 30 OECD member countries for mobile, fixed and Internet subscriptions and for income (GDP per capita); and ITU data for prices. We expect that the network externality effect will be becoming weaker as wireless networks transform from 2G to 3G, and approach saturation.
Mobile Telecommunications and the Impact on Economic Development
Harald Gruber
European Investment Bank
Projects Directorate 100 Boulevard Adenauer
L-2950, Luxembourg
Pantelis Koutroumpis
Imperial College London - Tanaka Business School
South Kensington Campus
London SW7 2AZ, SW7 2AZ
United Kingdom
Abstract
The paper intends to show the economic impact on mobile telecommunications across the world and its particular the relevance for developing countries. The macroeconomic impact of telecommunications in general has been covered by a number of important studies (e.g. Röller and Waverman, AER 2001), but the focus on mobile telecommunications has been neglected by the academic literature to a large extent. The issue is however covered repeatedly in the periodical press (e.g. survey of Economist of 26 Sept. 2009). It seems therefore appropriate that the issue is disentangled on the basis of rigorous economic analysis. The paper wants to present the main driving forces of the diffusion of mobile telecommunications and its impact on the economy. The main hypothesis is that mobile telecommunications being a network industry generates substantial externalities that increase with the reach of the diffusion of technology. The description is supported from results of a rigorous econometric analysis, using a method tackling the problem of endogeneity (3SLS estimations). Preliminary results points towards the existence of externalities and the cross country difference will be discussed.
Productivity Impacts of Mobile versus Fixed Broadband Use
Herbert G. Thompson, Jr.
McClure School of Information and Telecommunication Systems
Ohio University
Athens, Ohio 45701
Email: thompsh3@ohio.edu
Christopher Garbacz
Flora, MS 39071
Email: cgarbacz@yahoo.com
Abstract
Broadband telecommunication service is growing rapidly and its economic impact is likely to vary considerably around the globe. This study focuses on the direct effect (broadband penetration as an input), and separately, the TFP efficiency effect of broadband (as an information network externality), using a model developed in Thompson and Garbacz, (2007). We analyze and compare aggregate fixed and mobile broadband usage and their effect on the economy, using cross country data. Key variables are adjusted to a per household basis, using information on household size. The developed country models both direct and efficiency models suggest that mobile broadband has a perverse effect, reducing GDP per household in the direct model while increasing inefficiency in the indirect model. This result could be due to non-productive applications of mobile broadband technology in the developed world, such as an uneconomic substitute or complement to existing fixed broadband. Fixed broadband has a positive effect in the direct model, but no effect in the indirect model.
Firm Growth and Profitability:
The Role Of Mobile Technology And Organizational Practices
Heli A. Koski
ETLA, Research Institute of the Finnish Economy
Lonnrotink. 4 B
FIN-00120 Helsinki, Finland
heli.koski@etla.fi
Abstract
This study uses a unique survey data from 398 Finnish manufacturing firms to explore how the order of magnitude of mobility and connectivity of a firm’s ICT stock in conjunction with various organizational innovation and HRM practices affect the firm’s performance. The data suggest that mobile connectivity as such does not significantly contribute to the firm’s growth and profitability. However, the empirical results find support for the agency theory based argument: a greater mobility associated with the use of a pertinent economic incentive scheme and a systematic performance monitoring seems to promote the firm’s growth. In addition, re-organization of tasks within an organization is implemented most successfully, boosting profitability, when the firm’s re-organization strategy incorporates the adoption of mobile, Internet-connected IT stock.
Mobile Phones and Economic Development in Africa
Jenny C. Aker
Assistant Professor of Development Economics
Fletcher School and Department of Economics
Tufts University
Medford, Massachusetts
and
Non-Resident Fellow
Center for Global Development
Washington, D.C.
Jenny.Aker@tufts.edu
Isaac M. Mbiti*
Assistant Professor of Economics
Southern Methodist University
Dallas, Texas
IMbiti@smu.edu
Abstract
We examine the growth of mobile phone technology over the past decade and consider its potential impacts upon quality of life in low-income countries, with a particular focus on sub-Saharan Africa We first provide an overview of the patterns and determinants of mobile phone coverage in sub-Saharan Africa before describing the characteristics of primary and secondary mobile phone adopters on the continent. We then discuss the channels through which mobile phone technology can impact development outcomes, both as a positive externality of the communication sector and as part of mobile phone-based development projects, and analyze existing evidence. While current research suggests that mobile phone coverage and adoption have had positive impacts on agricultural and labor market efficiency and welfare in certain countries, empirical evidence is still somewhat limited. In addition, mobile phone technology cannot serve as the “silver bullet” for development in sub-Saharan Africa. Careful impact evaluations of mobile phone development projects are required to better understand its impacts upon economic and social outcomes, and mobile phone technology must work in partnership with other public good provision and investment.
The Effects of Competition and Privatization on Chinese Telecommunications
Shilin Zheng, School of Economics and Management,
University of Science and Technology Beijing
Michael R. Ward, University of Texas at Arlington
March, 2010
Abstract
The Chinese telecommunications sector is undergoing fundamental changes as it moves towards liberalization. This paper examines how liberalization and privatization have affected the performance of Chinese telecommunications industry. We identify greater liberalization with increases competition as measured by reductions in industrial concentration and privatization with deceases in state equity-ownership in firms. With a new panel dataset of thirty-one Chinese provinces from 1998 through 2007, we examine the effects of reforms on prices and subscription levels of both of mobile and fixed line telecommunications operators within both the mobile and fixed line platforms. We find large gains in market performance from decreased concentration among mobile providers not for fixed-line service. The evidence on the effects of state-ownership are similarly mixed. We then estimate substitution patterns between these telecommunications platforms and find evidence of consumer substitution between the fixed and mobile platforms for subscription, but not usage.
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