A study on the late take-off phenomenon in the diffusion of telecommunication services

Abstract

Telecommunication services are distinctive in that their adoptions are influenced by network effect resulting in the late take-off phenomenon and the critical mass problem. With network effect, it is difficult to forecast the success of telecommunication services since the critical mass plays a key role in their diffusion. Thus, it is crucial for telecommunication services providers to reach the critical mass. The purpose of this is to examine the late take-off phenomenon in the diffusion of telecommunication services in the perspective of diffusion theory in marketing, and to draw some implications from analysis of the phenomenon. For these purposes, first, the diffusion process of fax services in the US and Korea was compared with those of general consumer durables in order to draw implications about late take-off phenomenon. Second, the diffusion data were analyzed by new diffusion model proposed in this study. Finally, a simulation approach was introduced for the theoretical implication of the critical mass problem in the start-up telecommunication services. Some implications found in this study are as follows: First, it was found that the reason for the lake take-off phenomenon results from the low heterogeneity in the threshold value distribution of the potential adopters. Second, the interactive nature of telecommunication services makes the distribution for the threshold value among the potential adopters heterogeneous, and in turn, the low heterogeneity of threshold value affect the prospective adopter``s decision for adopting the service by making them affected via word-of-mouth effect. Finally, several simulation results show shy the zero-pricing policy works at the introductory time. The zero pricing policy at the introductory time makes the distribution curve of the threshold value move to the left. Hence, this policy has an effect to increase the probability of adopting the service earlier.