June 5, 2018 – Recent research by TPI Research Fellow Sarah Oh finds that regulations preventing mobile providers from bundling handsets with service reduces the rate of service adoption. The paper, co-authored with Clemson’s Thomas Hazlett and George Mason’s Brent Skorup and just published in the Journal of Competition Law & Economics, provides new evidence on some of the benefits that can arise from vertical integration.
Today’s concerns about vertical integration in telecommunications markets are not new. In the early 2000s, when 3G first appeared, regulators worried about vertical integration in mobile subscription plans. Hoping to protect consumers, the Finnish regulator barred wireless carriers from bundling handset sales with mobile service plans.
But 3G adoption lagged, and the Finnish regulators reversed course in early 2006, when carriers were permitted sell both phones and cellular services together. This change made possible empirical comparisons. Using an S-curve model for diffusion of new technology, the authors compare quarterly uptake rates in Finland with European averages for 3G subscriptions from 2006 to 2012. After the Finnish regulator allowed bundling, 3G handset adoption exceeded European averages, a dramatic switch from the pre-deregulation situation.
This study is an important contribution to the competition literature on vertical integration. Lagging 3G uptake in Finland’s early days of 3G may have been explained, in part, by ill-formed competition policy.
Contact: Chris McGurn, 202-828-4405, firstname.lastname@example.org
The Technology Policy Institute
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