Technological innovations and 3G mobile phone diffusion: Lessons learned from Japan

Abstract_Technology and innovation become more important determinants of
corporate competitiveness, and the telecommunications sector is no exception.
A good example is found in the development of the mobile phones. Technological
development, embodied in innovative functions developed from the first (1G) to third
generation (3G) systems, has played significantly important roles in the growth and
upheavals of the Japanese mobile phone market. In addition, development in contents,
value-added services which are supplied by related firms formed in the vertical structure,
charging systems, handset development; all these have made this small gadget
an increasingly important part of daily life. This paper heuristically analyzes the effect
of technological innovations and competition policies on the diffusion of 3G mobile
phones in Japan. In particular, this paper attempts to identify what are factors to promote
the Japanese 3G mobile phone by using panel data analysis. In constructing an estimation
model, the number of subscribers to 3G mobile phone services is taken as a dependent
variable, while the following three groups of variables (1) GDP and charges, (2) competition
policies, and (3) technological innovations are selected as independent variables. The study
examines not only the 3G market as a whole but also the three major individual carriers,
namely NTT DOCOMO, au (KDDI) and Softbank. In particular, the latter focuses on the
different strategies of the three carriers toward innovations and competition. Monthly data
related to 3G mobile phones from October 2001 to December 2008 is used for the analysis.