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The SMS Bandwagon in Norway: What Made the Market?

In: Governance of Communication Networks

Author

Listed:
  • Kjetil Andersson

    (Telenor R&D)

  • Øystein Foros

    (Norwegian School of Economics and Business Administration)

  • Frode Steen

    (Norwegian School of Economics and Business Administration)

Abstract

Short Message Service (SMS) has been an overwhelming success in Europe, substantially larger than in the United States. Norway represents in relative terms one of the largest SMS markets in the world. The aim of this paper is to examine the relationship between economic theories of bandwagon effects, and the Norwegian mobile providers’ management of the SMS market. We narrow the focus on the problem of getting the SMS bandwagon rolling. We emphasise two features crucial to the SMS success. The first is low prices on text messaging relative to mobile phone call charges for low-end tariffs. This seams to have been particularly important in the price sensitive youth market. The second key feature is the high degree of interlinking with respect to functionality and pricing. Both these features differ between Europe and the United States, and we argue that this might explain the difference in market development. The development in the SMS market suggests that it is important that the regulator does not interfere in the early stage. In the SMS market the absence of regulations and ex ante superfluous functionality ended up ex post as major successful services. This suggests that the regulator should be very careful when designing regulation regimes in bandwagon markets to avoid reduced innovation.

Suggested Citation

  • Kjetil Andersson & Øystein Foros & Frode Steen, 2006. "The SMS Bandwagon in Norway: What Made the Market?," Contributions to Economics, in: Brigitte Preissl & Jürgen Müller (ed.), Governance of Communication Networks, pages 187-201, Springer.
    • Handle: RePEc:spr:conchp:978-3-7908-1746-1_11
    DOI: 10.1007/3-7908-1746-5_11
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    Cited by:

    1. K. Andersson & Ø Foros & F. Steen, 2009. "Text and voice: complements, substitutes or both?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 18(6), pages 1231-1247, December.

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