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Adoption and use of mobile telephony in Europe

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CHAPTER 2 ADOPTION AND USE OF MOBILE TELEPHONY IN EUROPE
Sandor Bakalis, Muriel Abeln and Enid Mante 1. Introduction In 1995/1996 KPN Research ITB conducted a research project on macro-factors which cause different adoption patterns of mobile telephony in Europe. The effects of social and cultural factors on the adoption of mobile telephony has been of special interest here. This paper gives a brief outline of some of the results. In order to identify the macro-factors that play a role in the adoption of mobile telephony the following questions were put: 1. What differences can be observed between the adoption patterns of various countries? 2. What factors can account for differences in the adoption of mobile telephony in various countries? 3. Which of these factors can be identified as social and cultural factors and what is their part in the adoption of mobile telephony? The analysis was conducted through a combination of literature-search as well as quantitative analysis. The analysis is mainly limited to the European continent but there is an additional more extensive comparison between the European continent and the USA. This research design leads to a general overview of the factors that possibly account for different adoption patterns. However, the role of social and cultural factors did not become very clear. For this reason, we had to add some qualitative input to our data. 2. Differences in adoption of mobile telephony Countries can roughly be divided into two groups. The countries of the first group are characterised by an early start and/or a fast adoption rate. This combination has resulted into high adoption levels at this moment. The first group consists of the Nordic countries, Switzerland, the United Kingdom and the United States. The countries of the second group started at a later stage or showed a rather slow adoption rate, resulting in current low adoption levels. This group consists of the remaining countries of Western Europe, the Southern European countries and some of the Eastern European countries. 3. Factors of potential importance

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There are a number of factors that explain the different states of mobile telephony in the various countries. One very important „success-factor‟ was the current state of the fixed network. A low penetration of fixed telephony, combined with a high waiting list for new fixed connections, was found in various countries showing relatively high adoption rates. This substitution-effect might not only have played a role in „poor‟ countries, but also in the Nordic countries where geographical factors made it unattractive to develop a widely spread fixed network. In some other countries factors like population density and urbanisation might account for the current state of the fixed network. In Eastern Europe the current inferior state of the fixed network, which lead to substitution effects, was mainly a result of governmental policy. There seemed to be fairly clear indications that the introduction of GSM gave a boost to the adoption of mobile telephony. A possible explanation might be the extra services made available and the effects of intensive promotion and publicity of GSM with its introduction. Income seems to explain adoption in some cases and so does price, although there is no universal effect across countries. As regards the price of telephony, a key factor was the connection charge for fixed telephony which showed a significant correlation with the adoption level of mobile phones. It seems that initial costs of telecommunication services play a more important role than one rationally might expect. Educational level correlates with the adoption of mobile telephony and can both directly or indirectly explain the adoption rate of mobile telephony. 4. Culture and social structure The research showed us that the effect of social and cultural factors is subtle. One of the variables which should have an effect is mobility. The research results indicate that only international mobility in this respect shows a significant correlation with adoption of mobile telephony. This seems to support the hypothesis that mobile telephony, at this moment in time, is mainly a business tool. Individualism as a variable also seems to account for some subtle differences. The data yielded no consistent indications that a person‟s status plays a role in the adoption. This is surprising because in the literature the role of status is perceived to be very important, especially for early adopters of new technology. The main reason for the lack of support for this hypothesis might lie in the fact that there are different dimensions to the concept of „status‟: status may be linked to wealth, but also to importance, to innovativeness, to sophistication, to wisdom, etc. There may well be variation between countries in terms of how status is composed of these different dimensions, and in any particular country the dimensions related to status might not be the ones connected to the possession of a mobile phone. Our results, however, do not prove that social and cultural factors are without any importance for the adoption of mobile telephony. It is plausible that the data collection itself is responsible for the absence of such a correlation. It might be that the macro data used for the report are too crude for the more refined analyses needed to discern the effects of social and cultural factors.

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Another, more plausible, explanation may be that up until now mobile telephones (even in the USA) are still primarily business tools, used in the work sphere. Things might change when mobile telephony moves more and more into the private sphere. Lifestyle and lifecycle for example might become very important for explaining differences in use, as might gender as a culturally defined role and position in society. Finally the data give no indication of the ways in which and the frequency with which mobile phones are used. Even in the work sphere individuals have a choice of showing off their mobile phone in the public sphere or making calls more subtlely; using it whatever the occasion or using it only when it is really necessary. These findings suggested that more research on such aspects, as well as into the choice between using fixed telephony or mobile telephon,y is required. 5. Analysis of North-western Europe By arranging the countries into a number of clusters based on geographical location and other similarities we have tried to determine the variables that might account for differences in the adoption of mobile telephony. We have also paid some extra attention to the role of culture. Because of limited time, we have made use of nonscientific descriptions of the culture of various countries for this purpose. These texts are rather clichéd, but nevertheless supply a general overview of clear cultural differences between various countries. Still, the subjectivity of these sources must be emphasised. 5.1 General overview As a first step in our analysis we made charts of the adoption of mobile telephony for each country. This enabled us to compare the adoption patterns of the various countries to determine which ones were fast and slow adopters as well as to check for irregularities or the absence of irregularities. The charts have taught us that the adoption of mobile telephony often shows a line that has more or less the smooth start of a standard S-curve (Figure 1 ). Some of the countries investigated followed this standard pattern more than others. Still, a tentative conclusion that can be derived is that the adoption of mobile telephony seems to be to a substantive extent an autonomous process. After its introduction, it just starts to take off steadily.

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Figure 1 Adoption of mobile telephony

A number of countries show an almost perfect standard S-curve for the adoption of mobile telephony (Figure 2). Germany, The Netherlands, Portugal, Spain, Austria, Finland and especially the United States show this kind of adoption pattern from the of moment of introduction up to the present time. Only Finland shows a slight bend after eleven years ( possible causes of bends like this will discussed later in this paragraph). Figure 2 shows us that, although all countries follow roughly the same pattern, in some countries mobile telephony „takes off‟ earlier than in other countries. Portugal, where mobile telephony is still quite new, has accelerated quickly. In Spain, Portugal‟s geographical neighbour, mobile telephony was introduced only two years before Portugal, but adoption has taken place at a far lower rate.

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Figure 2 S-Curves The smooth regular adoption curve of the United States is absolutely striking. When we also compare the development of gross domestic product, we see a similar pattern. European countries all show a curve with „ups‟ and „downs‟, but the United States shows a curve with a very steady increase every year. It is very seductive to conclude that a stable economy leads to „stable‟ adoption. Changes in economic growth might account for changes in the speed with which mobile telephony is adopted. 6. Clustered cases However, many countries within the same geographical area, or grouped together on the basis of other similarities, show very different adoption patterns. We will now cluster a number of countries based on these similarities, and take a look possible explanations for these differences. To find these explanations we will make use of the quantitative data we already collected. 6.1 North-western Europe The cluster we will take a closer look at is north-western Europe. We will compare Germany, Belgium and The Netherlands (Figure 3). This cluster gives us a chance to focus on non-economic factors. Gross domestic product per capita is about the same for the three countries. The cost of mobile telephony is also about the same for The Netherlands and Belgium, but a bit higher for Germany. Still, we see three very different adoption curves. Germany started one year later than The Netherlands, but accelerated at a faster rate. Belgium started two years later, but does not seem to have been very successful in expanding the mobile telephony market to date.

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Figure 3 North-Western European Adoption

A first possible explanation for the differences might the level of competition in the mobile telephony business. This variable shows the same pattern as the current adoption levels in the three countries. Germany shows the highest level of competition, with two providers of GSM active from the start in 1991. A third provider of mobile telephony, which is licensed to offer DCS 1800, has already been introduced. The Dutch have only introduced competition into the mobile market this year. In September 1995 the second Dutch GSM operator, Libertel, started its service. In Belgium however, mobile telephony is still offered by only one operator. Although the early introduction of competition in Germany has not lead to lower prices than in Belgium and the Netherlands, it might still have had some positive effects on the adoption rate. Competition between two providers might not necessarily lead to lower prices, but it will probably result in increasing promotion efforts. Maybe it will also lead to a situation in which operators offer (more) extra services to their subscribers. In this way it will still be more attractive to subscribe to GSM, even though prices are not lower than before competition was introduced, or lower than elsewhere. Figure 4 shows that although analogue mobile subscription was already taking off quickly after ten years, GSM was responsible for the real „boost‟ over the last three years. Again, we cannot be sure about the situation when GSM had not been introduced.

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1800000

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Figure 4 Effect of the Introduction of GSM A somewhat strange finding in our data was that relative sales of luxury goods like watches and jewellery are much higher in Belgium than in Germany and The Netherlands, even though there are still about average compared to other European countries. On the other hand, ownership of videocameras, which is also sometimes used as an indicator of people‟s status, shows the reverse pattern; the level of ownership of this good is lower in Belgium. This might indicate a point we discussed earlier, namely national variations in the ways of defining status. In Belgium one might be more interested in traditional luxury status-symbols, while German and Dutch people assign status to, for instance, the possession of new and exclusive technological devices. Of course, the higher penetration of videocameras in Germany and the Netherlands may also be only the result of innovativeness. To create a more solid foundation for this hypothesis, we compared the scores of other variables used as indicators of innovativeness. Penetration of videorecorders appeared to show a comparable pattern to penetration of videocameras, which is not surprising of course. However, as regards other high technology products, Belgium does not score lower, and sometimes scores even higher, than Germany and the Netherlands. For example, the relative number of microwave ovens in Belgium is much higher, and Belgian penetration of PC‟s and CD-players is in between the level for Germany and for The Netherlands. Average household size is somewhat higher in Belgium, and the share of one-person households is smaller than in Germany and Netherlands, which might indicate a less individualised Belgian society. This might account for a part of the Belgian adoption pattern. Mobility is notably higher in the Netherlands. The Dutch travel more by car as well as by train and by aeroplane. Only in Denmark and Norway is the level of car traffic higher. This leads to the question of why the Dutch do not adopt mobile telephony at
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a higher rate than they do since they are more mobile. One possible answer lies in the geography of The Netherlands. The Netherlands has the highest population density in Europe so the Dutch might travel a good deal but distance is never large and traveltime stays short. Yet, the penetration of pagers is very high in the Netherlands, indeed it is the second highest level in Europe, just behind Norway. This indicates that the Dutch must experience a certain need for reachability, notwithstanding the relatively slow penetration of mobile telephony. This can be explained in different ways. First the high penetration of pagers might prevent the Dutch from buying a device that has more or less the same functionality. From this point of view a pager is to a certain degree a substitute for mobile telephony. However, Norway scores very high on both pager-penetration and adoption of mobile telephony. So the substitution hypothesis is being refuted in at least one case. Another possibility is that a pager just serves the need of the Dutch, so that they don‟t want more. “Behave normally, that‟s mad enough” is the impossible translation of a Dutch phrase, which indicates that the Dutch don‟t like others to distinguish themselves from the average Dutchman. A mobile telephone might be considered as an „unnecessary‟, and expensive tool to distinguish. This hypothesis is supported by the low level of expenditure on jewellery in The Netherlands compared to the European average. The German case hides a factor that must not be overlooked. In 1990, the Eastern and Western part of Germany were reunited. Before that moment Eastern Germany was a country comparable to other Eastern European countries in many respects. In 1989, the penetration of fixed main telephone line was 11% in Eastern Germany (Berlage & Schnöring, 1995, p.29). This could mean that patterns like those we have seen in Hungary and the Czech republic could be found there too. However, according to Berlage and Schnöring (Berlage & Schnöring, 1995, pp.44-45) substitution effects have not played, and are still not playing, as large a role as in other Eastern European countries. The reason for this difference is the high rate at which the fixed network is being rolled out by the German telecom operator since that reunion. The high price difference between fixed and mobile telephony would probably have lead most potential users to wait until they could get a fixed connection. Only those who could afford the high price of mobile telephony and were in urgent need for a new telephone connection would have used a mobile system as a temporary substitute. Unfortunately, our data do not differentiate between current subscribers in the former Eastern and Western Germany so we cannot draw any firm conclusion as to whether a substitution effect provided part of the explanation for the lead of Germany over Belgium and the Netherlands. However, we should not ignore this is as being possibility. 6.2 Qualitative sources Reading Box 1, we come across some similarities between the Belgium, Germany and The Netherlands. They all do not seem to like extravagance and ostentation. So in all three cases it is not likely the mobile telephone will have a role as a status symbol. All the countries also seem to be characterised by some kind of work ethic, although not to the same degree. Belgium seems to be characterised by a lifestyle that tends more
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towards the joys of life than Germany and the Netherlands. This might explain in part the low adoption of mobile telephony in Belgium. Besides the „pure‟ status assigned to a mobile telephone, the „importance‟ aspect might also be considered less significant in Belgium, compared to the other two countries. An important difference seems to be the degree in which one is „allowed‟ to spend money. While the Dutch consider spending money to be a „vice‟, Germans do not seem to have a problem with doing so. This might account for a part of the difference between Dutch and German adoption levels. Maybe the high adoption level of pagers is because they are worthwhile whereas a mobile telephone costs a little too much. The Netherlands The Dutch are open about everything. To assure their neighbours, and themselves, that they have nothing to hide, the Dutch build houses with big windows and do not draw their curtains at night. You can watch your neighbours ‘ television, see what they are having for dinner, or note whether they shout at their children. The Dutch ‘think with their pockets’. This is the nation that has come up with a scraper for getting the last remnants of the yoghurt that’s inside a bottle. The Dutch believe that they were all born miserable sinners, and that this world is a place to work and suffer in. The pursuit of wealth is a favourite Dutch pastime, and accumulating money is a virtue. Spending it is a vice. The Dutch consider a flashy display of worldly goods as extreme bad taste. It is however perfectly acceptable to surround yourself with good, sound objects that work efficiently. They may even be stylish, but never ostentatious. Source: Bolt (1995) Belgium Belgian know how to enjoy life. But fun only follows after work. In the daytime one should be working. One pays some money into the bank for the future and the remaining time one can spend on the pleasures of life. A Belgian wants to enjoy his prosperity, he strives for respectability and independence, and he persistently tries to comply with the demands that are made on him by his fellow men and society. Belgian cannot cope with ostentation. Still Belgians can be very snobbish when it’s about dining in the right restaurant and buying in the right stores, but they are always ready to criticise when others show snobbish behaviour. A luxury villa in the middle of the park, a big car, shopping at the international couturiers, regular holidays to exotic destinations, yearly winter sports, those are the signes extérieurs de richesse that Belgians hanker for and that advertisers and glossy magazine like to show. In reality only very little Belgians live this way. Once they have enough money, just a few spend their money in this way. Source: Mason (1995) Germany Germans have a high esteem of Bildung, which means upbringing and culture. If you have had good education, let everybody know! Has your husband had good education, call yourself Frau Doctor. In general, Germans like to flaunt their wealth. They recognise quality and are willing to pay for it.
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Germans dress well, drive indestructible cars, and their houses have doubleglazing, central heating and are equipped with reliable devices. The average life standard is higher than in most European countries, and someone that has earned a lot of money is allowed to spend it. Snobbery of the kind that prescribes that people should ‘know their place’ hardly exists. When one has become rich by working hard or being smart, few will deny the right to enjoy it. Germans don’t like extravagance at all. Source: Zeidenitz and Barkow (1995) Box 1 Bibliography Berlage, M. & Schnöring, T. (1995) „The Introduction of Competition in German Mobile Communications Markets‟, in Schenk, K.E., Müller, J. & Schnöring, T. (eds). Mobile telecommunications: Emerging European countries, Artech House, Boston. Mason, A. (1995) Dat zijn Nou Typisch Belgen, Krikke c.s., Leiden. Zeidenitz, S. & Barkow, B. (1995) Dat zijn Nou Typisch Duitsers, Krikke c.s., Leiden.

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