Interaction of deregulation and network externalities in an accelerated diffusion of mobile telephony

The penetration of mobile telephony exceeded 100% in only two countries in 2002, and with penetration of 108% Taiwan was the higher of the two. This study identifies the impetuses behind the accelerated growth of mobile telephony in Taiwan, in terms of the diffusion model and forces driving the diffusion. Model comparison methodology is introduced to identify the most appropriate diffusion model. The driving forces for the diffusion rate of the model are then estimated. Empirical results, based on data for 1988-2007, indicate that the logistic model performs best. Network externalities explain the dynamics and superiority of the logistic model. Deregulation results in market competition, making it the primary driver for the diffusion. This empirical study also demonstrates that deregulation promotes the diffusion to the takeoff point, which is critical to a self-sustaining diffusion. Overall, network externalities are in conjunction with the deregulation to push the rapid diffusion in Taiwan.