Standardization versus Coverage in Wireless Telephone Networks

Neil Gandal, David Salant, and Leonard Waverman

1/01/2005
(Original Publish Date: 9/23/2001)

The issue of market-based versus mandated standards has been addressed in many settings. In most settings in which network effects are present, compatibility across platforms has been a key determinant of the success or failure of a particular technology. In the case of wireless telecommunications, however, interconnection and the availability of the relevant infrastructure can be a substitute for compatibility. In this paper, we examine the tradeoff between mandated standards and interconnection. We first provide institutional background; we then empirically examine whether, other things being equal, penetration rates were lower (or higher) for countries with multiple incompatible digital standards. We finally discuss the implications of our results for the current debate about 3G standards, in which CDMA2000, which is backed mainly by US firms, competes with WCDMA, which is backed by the European Community.