Competition and Mobile Network Investment in China’s Telecommunications Industry

29 Pages Posted: 17 Jan 2012

See all articles by Fei Kang

Fei Kang

Beijing University of Posts and Telecommunications (BUPT)

Janice Alane Hauge

University of North Texas

Ting-jie Lu

affiliation not provided to SSRN

Date Written: September 24, 2011

Abstract

Until now, researchers have not addressed the relationship of competition and investment in China’s telecommunications industry, the biggest mobile telecommunications market in the world with unique institutional characteristics. This paper seeks to fill this gap by examining the effects of mobile telecommunications competition on mobile network investment in China. Fixed effects and dynamic panel data models using Chinese regional panel data over the period 2003-2009 show a consistent positive correlation between the mobile market concentration and mobile network investment in the industry. This phenomenon is attributed mainly to the soft budget constraint problem that occurs under asymmetric market competition between state-owned enterprises. It is suggested that the asymmetric competitive structure has been a potential driving force of overinvestment in the mobile network in China; hence, improving the competitive structure by implementing appropriate regulatory policy rather than by policy allowance or inequitable policy burdens would be an effective way to alleviate overinvestment in network facilities. Co-construction and sharing of network infrastructure should be carried out to reduce duplication of infrastructure especially in the coming 3G era of China’s telecommunications industry.

Keywords: Mobile telecommunications, Competition, Network investment, Soft budget constraint

Suggested Citation

Kang, Fei and Hauge, Janice Alane and Lu, Ting-jie, Competition and Mobile Network Investment in China’s Telecommunications Industry (September 24, 2011). TPRC 2011. Available at SSRN: https://ssrn.com/abstract=1986361

Fei Kang (Contact Author)

Beijing University of Posts and Telecommunications (BUPT) ( email )

No 10, Xitucheng Road
Haidian District
Beijing, 100876
China

Janice Alane Hauge

University of North Texas ( email )

1155 Union Circle #305340
Denton, TX 76203
United States
940-565-4544 (Phone)

Ting-jie Lu

affiliation not provided to SSRN

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