The International Handbook of Telecommunications Economics, Volume I
Edited by Gary Madden
Chapter 5: Telecommunications demand
5. Telecommunications demand Lester D. Taylor INTRODUCTION The changes that have racked the telecommunications industry during the last twenty years make this a particularly problematic chapter to write. With deregulation, competition, and rapid technological change, telecommunications demand analysts have been forced to contend with rapidly shifting industry boundaries, appearance of new products and services, ﬁrm (as opposed to market) demand functions, explosive growth of mobile and wireless telephony, disappearance of traditional sources of information and data, and, of course, emergence of the Internet. As a consequence, an overview, of the traditional sort, of the state of the art of telecommunications demand analysis (such as was presented in my 1980 and 1994 books) would be of limited relevance for the questions that are likely to be nascent in the years immediately ahead. Instead, my approach in this chapter will be to focus on fundamentals, and to describe in detail several studies that, in my view, illustrate the principles involved, with regard to both theory and technique, and transcend their particular applications. This will occupy the next three sections. An overview of the telecommunications demand literature then follows, while a list of challenges concludes the chapter. BASIC FEATURES OF TELECOMMUNICATIONS DEMAND The feature that most distinguishes telecommunications demand from demand for most other goods and services is that telecommunications services are not consumed in isolation. A network is involved. This gives rise not only to certain interdependencies and externalities that aﬀect how one models consumption, but also creates a clear-cut distinction...
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