Abstract
The opening quote nicely conceptualizes one of the most difficult challenges managers and regulators in the telecommunications sector face. While such individuals are not, for the most part, concerned with world-safety, they do need to address similar diversity issues in order to be profitable and to provide true universal services (i.e., reasonably priced, high quality telecommunication services to everyone who wishes to use them). Similarly to John F. Kennedy, managers and regulators understand that one-service or set of regulations that fits all may not be a wise strategy. Rather, their offerings and regulatory mechanisms are always flexible, and they cater to a heterogonous subscriber market. While wireless service providers do try to cater to different market segments by offering a variety of service packages, regulators often employ a single set of regulations that serve the entire market. On the one hand, organizations offering mobile services to individuals attempt to segment the market to maximize various performance factors, such as usage airtime, revenues, and customer base. On the other hand, policies should be in place to avoid the discrimination of specific less profitable customer categories. In fact, in the 21st century, mobile telephony has become so critical for the well-being of millions of people that it is vital to ensure the fairness of mobile services delivery.
“If we cannot end now our differences, at least we can help make the world safe for diversity.”
John F. Kennedy
TopOverview
The Need For Market Oriented Policies
Market segmentation is an obvious concept for wireless service providers. Its importance is further emphasized in today’s networked society. Currently, many telecommunication service providers cater to a much broader market than the one they had initially targeted. For example, twenty years ago, expensive handset and service charges led to the adoption of wireless services by mostly high-income individuals. In today’s markets, however, the penetration of mobile telephony has reached lower-income individuals as well (Jain, 2006). Thus, in modern heterogeneous markets, businesses continuously investigate demographic and psychographic profiles that affect subscriber interaction with telecommunication services (e.g., Chaudhuri, Flamm, & Horrigan, 2005; Rice & Katz, 2003). Their objective is to identify a number of distinct user groups and to serve them differently. For this, regulators utilize behavioral research to understand how subscribers, belonging to different market segments, develop perceptions and form behavioral outcomes of service usage, resulting in company revenues (Schejter, Serenko, Turel, & Zahaf, 2010). Therefore, mobile service providers may potentially discriminate against specific less profitable customer segments, for instance, low-income households who mostly subscribe to inexpensive basic plans, avoid premium services, live in remote regions, or are located in infrastructurally challenged areas.
To emphasize the importance of this issue, we may recall Hurricane Katrina, one of the deadliest natural disasters in the US history. Throughout this tragedy, wireless services were the only public communication means that remained intact. Thus, the potential use of mobile phones by lower-income individuals in the New Orleans area may have saved lives. Therefore, one may ask – ‘would things have been different had the Federal Communications Commission (FCC) enforced affordable access to wireless services for low-income families?,’ or ‘would things have been different had the FCC enforced certain quality standards (e.g., maximum number of disconnected calls) in low-income areas?’ It is believed that this argument conveys that both regulators and service providers should not only concentrate on differences in market segments to maximize their profits, but also on the facilitation of universal services.
Key Terms in this Chapter
Mobile Phone: Mobile phones are is a long-range, non-stationary, electronic device used for mobile voice and/or data communication over a wireless network which is comprised from a collection of transmission receiver base stations.
Market Segmentation: The process of classifying a collection of consumers into distinct sub-groups (segments) that behave in similar manners, share the same characteristics, or have similar needs.
Government Regulation: Government control over companies and consumer behaviors through rules, in order to produce outcomes which might not otherwise occur.
Universal Service: A legal and business concept used mostly in regulated industries. Originating in the telecommunications sector of the United States, universal service refers to the practice of providing a baseline level of services to every resident of a country.
Federal Communications Commission (FCC): The FCC is an independent agency of the United States government, created, directed, and empowered by Congressional statute, which regulates the telecommunications sector in the US.