1 Entry, standards and competition: firm strategies and the diffusion of mobile telephony*

This paper focuses on the effects of within and between standards competition and competition between firms on the performance of an emerging new technology, digital mobile telecommunication (2G). Our empirical exploration provides a more complete picture of the market dynamics of digital mobile telephony than the previous studies that have typically estimated econometric models that ignore the role of endogenous decisions of service providers in the observed market behaviour. The incorporation of endogenous supply side decisions regarding market entry and pricing to the model explaining the diffusion of digital mobile telephony allows us to distinguish the effects of within-standard and within-firm competition on the observed diffusion phenomenon. We use data from 32 industrialized countries over the 1992 1999 time period. It appears that incorporating the timing of market entry to the econometric model explaining 2G diffusion and service prices is, indeed, critically important. Controlling for entry provides more accurate estimates of the coefficients of the explanatory variables and also affects conclusions to be made concerning the policy variables o