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Figure 6. Competitive Index of Global Wireless Markets (Subscriber and Revenue Concentration)
Figure 7. Distribution by HHI3 valueThe US is another interesting competitive market. If you notice the HHI3 groupings, US isshown in an unlikely pairing with the three emerging markets of Pakistan, Russia, and Brazil.The primary reason is that the top 2 (Verizon Wireless and AT&T) control 60% and the top 3about 78% of the market and they are approaching the 80-100% band like other major markets.While we were researching the paper, the inevitable T-Mobile USA acquisition news broke. Howwill that transaction shape the US mobile market? We will deal with this question later in thepaper.Market power and HHI3HHI gives an indication of the market concentration. Given the dominance of China Mobile andTelcel in China and Mexico respectively, the HHI3 values are the highest in the world. To furtherunderstand the structure of the market, one can calculate the Dominance Index15 of the top twooperators, which can indicate if the market is a monopoly, duopoly or if it is more evenlydistributed amongst the top players. In the economic literature, 40% market share is a generallyaccepted threshold for what is termed a “dominant firm”.16 It should be noted that being amonopoly or a duopoly because of better products and prices is not against the law. As shown infigure 4, there are a number of industry segments companies have been able to chalk out a15 We calculated the Kwoka’s dominance index for the top 2 operators which is calculated bas the sum of the 2squared differences between each firm’s share and the next largest share in a market. D = ∑ (s i - si+1) where i = 1..316 An Empirical Examination of the “Rule of Three”: Strategy Implications for Top Management, Marketers, andInvestors, Can Uslay, Z. Ayca Altintig, & Robert D. Winsor, American Marketing Association, 2010
Figure 12. Top three Operator Competitive Equilibrium in Various Mobile Markets
Regulatorly model – JapanThe success of the Japanese mobile market in the 2000s seems to indicate that the regulatorymodel that Japan pursued yielded the maximum benefit to its citizens. Since the advent of i-Mode in February 1999, for almost 10 years, Japan has been ahead of the rest of the world inmobile broadband deployment (figure 13), high-end handsets (though these were primarilyfeaturephones), new services, technology breakthroughs and implementations, and in the paceof innovation in general.22 Korea followed a similar path and the market structure was quitesimilar. The governments in both countries collaborated closely with the mobile industry.The Japanese industrial policy, formulated by the Ministry of International Trade and Industry(MITI), has had much the upper hand over the Fair Trade Commission (FTC) - the UScompetition watchdog. One of MITI’s main objectives was to ensure a high rate of profitabilityand investment in Japanese industry. MITI was therefore always concerned with questions of“ruinous competition” leading to reduced profits and a lower propensity to invest. The Ministrythus officially sponsored a wide variety of cartels, sequenced investment by firms and intervenedin the exit and entry decisions of firms, all of which contributed to the high concentration ratiosobserved in the Japanese economy.23Figure 13. 3G subscriber growth during the last decade22 For a historical reference, see Wireless Data Services, Technology, Business Models, and Global Markets, ChetanSharma and Yasuhisa Nakamura, Cambridge University Press, 200223 Competition and Competition Policy in Emerging Markets: International and Developmental Dimensions, AjitSingh, G-24 Discussion Paper No. 18