Price competition with reduced consumer switching costs: The case of 'wireless number portability' in the cellular phone industry

摘要

To show that wireless number portability (WNP) drives market price downward and accelerates the process of market concentration. Wireless number portability (WNP) is a regulatory policy issued by the Federal Communications Commission (FCC) in 1996 that requires cellular service providers to allow customers who switch service networks to retain their original phone numbers. This policy, according to the regulators and consumer advocates, would ease the burden of network switching and promote competition market growth and foster new entrants. This policy was opposed by the industry because of fierce competition and added costs of implementing portability. This paper examines the conflict views of the regulators, consumer advocates and the industry in both consumer and firm perspectives and investigates how WNP may affect consumers and firms. In the introductory part of the paper, the network externality studies and WNP implementation are examined. In Section 2, a case study of WNP in the Hong Kong wireless phone market is presented. In Section 3, an analytical model on switching costs and network externality in terms of consumer choices and network pricing strategies are examined. In Section 4, the model is analyzed in terms of five propositions and its implications discussed. In Section 5, the implications of WNP in three directions of absence of network based price discounts, new users without switching costs, and implementation of WNP and interconnection costs are discussed. Section 6 concludes with the results of the study and the future of WNP.