The Impact of Regulation on Innovation and Choice in Wireless Communications
AbstractProposals to increase regulation of mobile wireless services, for example, by applying net neutrality" regulation, are often based on claims that such regulation would enhance innovation and increase consumer choice. In fact, they would have the opposite effect. The business practices that would be banned by such regulation are efficient mechanisms for spreading and reducing risk, lowering transactions costs, and enhancing marketing activities, all of which contribute to innovation and choice. Moreover, product differentiation increases competition and thus contributes both directly and indirectly to consumer choice. While some types of exclusive agreements and other discriminatory" practices can theoretically harm competition, the precondition for such harm to occur i.e., market power in one or more of the affected markets generally is not present in wireless markets. Hence, the proposed regulations cannot be justified on grounds of market failure. Rather than increasing innovation and consumer choice, as promised, they would severely disrupt the wireless sector's highly successful business model and significantly reduce innovation and consumer choice.
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Bibliographic InfoArticle provided by De Gruyter in its journal Review of Network Economics.
Volume (Year): 9 (2010)
Issue (Month): 1 (February)
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Web page: http://www.degruyter.com
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- Bauer, Johannes M. & Shim, Woohyun, 2012. "Regulation and digital innovation: Theory and evidence," 23rd European Regional ITS Conference, Vienna 2012 60364, International Telecommunications Society (ITS).
- Eichberger, Jürgen & Mueller-Langer, Frank, 2012. "On the Welfare Effects of Exclusive Distribution Arrangements," MPRA Paper 39691, University Library of Munich, Germany.
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