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

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.