Telecommunications Market Disequilibrium in Southeast Asia
Open Access
- Author:
- Mahinchai, Montira
- Graduate Program:
- Agricultural Economics
- Degree:
- Master of Science
- Document Type:
- Master Thesis
- Date of Defense:
- July 03, 2012
- Committee Members:
- Spiro E Stefanou, Thesis Advisor/Co-Advisor
- Keywords:
- telecommunications
mobile telephones
disequilibrium
southeast asia - Abstract:
- There has been a tremendous growth worldwide in a telecommunications sector during the past decade. Mobile telephone service serves as a perfect example for this trend – the global mobile-cellular subscriptions rose from 962 millions in 2000 to 5,373 millions in 2010 (ITU, 2012). Identifying which market factors influence this remarkable increase in subscriptions and how a mobile telephone market changes over time is crucial for understanding how this growth opportunity can benefit mobile telephone consumers, producers, and the society as a whole. The demand for and supply of mobile telephone services across five developing countries in Southeast Asia are analyzed. This study contributes to the existing literature on telecommunications by using a disequilibrium approach which acknowledges the inherent lumpy capacity building aspect of the infrastructure investment along with the rapidly growing demand for mobile phone services. Two specifications of this approach, the directional method and the two-step method, are employed. The first method utilizes a change in price to separate the observations into the demand and supply equations, then estimates the mobile demand and supply via a simple linear ordinary least squares regression. Alternatively, the second method uses a probit maximum likelihood estimation in the first stage to obtain the selectivity correction factors. The demand and supply equations, along with the correction factors, are then estimated via OLS in the second stage. The findings suggest that a one-year lagged mobile subscription charges, a share of population in urban areas, a literacy rate, and an age-dependency ratio have significant impacts on mobile telephone subscriptions. However, an income effect reflected by GDP per capita has no effect. As for a supply for mobile telephone subscriptions, in addition to the one-year lagged mobile subscription charges, total number of staff, investment in and revenue generated from mobile phone services also affect the supply significantly. The demand and supply curves generated from the parameters estimated indicate the existence of market disequilibrium, which results in deadweight loss for the society. The magnitude of deadweight loss generated vary across countries and time periods, with the mobile telephone market is in excess demand or excess supply. From 2003 onward, the mobile phone markets in Southeast Asia are under excess supply with a growing magnitude, causing mobile users the gainers from this social welfare loss. The Malaysian market is the nearest to the equilibrium levels. The demands for mobile phones in Philippines and Vietnam commence later and lag behind than those of their neighboring countries. These findings imply that policy makers should concentrate on both encouraging mobile phone service consumption, especially for the smartphones, and facilitating market activities along with incentivizing network expansions among the producers.