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Measuring the value of mobile telecommunications networks

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  • Leo Van Hove

    (Vrije Universiteit Brussel (Free University of Brussels))

Abstract

Fuentelsaz, Garrido and Maicas (2015) propose an “improved” measure of network value for the mobile telecommunications industry. Unfortunately, their measure has multiple issues. For one, it is biased against networks that are small and/or active in small markets. Also, it cannot adequately take into account intertemporal changes in mobile operators’ price discrimination behaviour. Finally, where the functional form of the network effects is concerned, Fuentelsaz et al. invoke Zipf’s law without providing any empirical justification. This paper suggests an alternative for Fuentelsaz et al.’s measure and exploits as yet unused data on on-net discounts to apply it to the cases of Germany and Belgium. It is shown that the alternative measure does not suffer from the same weaknesses as Fuentelsaz et al.’s measure – bar the final one. The paper therefore screens the literature on other network industries in search of an empirical foundation for the network externality assumption. However, the paper finds that the broader literature is also still struggling with this issue.

Suggested Citation

  • Leo Van Hove, 2016. "Measuring the value of mobile telecommunications networks," Netnomics, Springer, vol. 17(3), pages 191-222, November.
    • Handle: RePEc:kap:netnom:v:17:y:2016:i:3:d:10.1007_s11066-016-9108-0
    DOI: 10.1007/s11066-016-9108-0
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    Cited by:

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    2. Van Hove, Leo, 2016. "Testing Metcalfe's law: Pitfalls and possibilities," Information Economics and Policy, Elsevier, vol. 37(C), pages 67-76.
    3. Chang, Sungyong & Park, Sanghyun, 2021. "Borders of Network Effects and Early Internationalization as a Latecomer Strategy," SocArXiv d74he, Center for Open Science.
    4. Van Hove, Leo, 2018. "Quantifying and interpreting network effects: ‘Own-network’ is not the same as ‘firm-level’," Information Economics and Policy, Elsevier, vol. 45(C), pages 47-51.

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