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The Impact of Regulation on Innovation and Choice in Wireless Communications

Author

Listed:
  • Ehrlich Everett M.

    (ESC Company)

  • Eisenach Jeffrey A.

    (Empiris LLC)

  • Leighton Wayne A.

    (Francisco Marroquin University)

Abstract

Proposals 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.

Suggested Citation

  • Ehrlich Everett M. & Eisenach Jeffrey A. & Leighton Wayne A., 2010. "The Impact of Regulation on Innovation and Choice in Wireless Communications," Review of Network Economics, De Gruyter, vol. 9(1), pages 1-51, February.
    • Handle: RePEc:bpj:rneart:v:9:y:2010:i:1:n:2
    DOI: 10.2202/1446-9022.1194
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    Citations

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    Cited by:

    1. Erik BOHLIN & Kevin W. CAVES & Jeffrey A. EISENACH, 2014. "Mobile Wireless Performance in the EU and the US: Implications for Policy," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(93), pages 35-58, 1st quart.
    2. Jan Krancke & Christoph Müller, 2011. "Innovationen in regulierten Netzindustrien," Schmalenbach Journal of Business Research, Springer, vol. 63(64), pages 32-51, January.
    3. Eichberger, Jürgen & Mueller-Langer, Frank, 2012. "On the Welfare Effects of Exclusive Distribution Arrangements," MPRA Paper 39691, University Library of Munich, Germany.
    4. Upender Subramanian & Jagmohan S. Raju & Z. John Zhang, 2013. "Exclusive Handset Arrangements in the Wireless Industry: A Competitive Analysis," Marketing Science, INFORMS, vol. 32(2), pages 246-270, March.
    5. Pelkmans, Jacques & Renda, Andrea, 2014. "Does EU regulation hinder or stimulate innovation?," CEPS Papers 9822, Centre for European Policy Studies.
    6. Wasapon Thanabodypath & Achara Chandrachai & Sudkate Chaiyo & Orawon Chailapakul, 2021. "Industrial Buyer Innovation Adoption Model: A Focus on a Smartphone-Based Electrochemical Analytical Device for Toxic Heavy Metal Detection," Sustainability, MDPI, vol. 13(21), pages 1-21, October.
    7. 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).

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