Effects of Digital Transformation and Network Externalities in the Telecommunication Markets

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Abstract

The main purpose of the paper is to address the effects of digital transformation in the telecommunications markets which are characterized by network externalities. By acknowledging disruptive effects of digital transformation age, the paper highlights challenges which were created by advancement of technological capabilities. The specific aim of the paper is to present a methodological framework for measuring the information society. The research will be based on an analysis of the number of subscribers by types of telecommunication services, in developed and developing countries, in the last two decades. In this regard, increasing the number of subscribers leads to higher value of the selected network. We expect confirmation of both hypotheses respectively (H1: Digital transformation affects the simultaneously continuous growth of the number of subscribers and the continuous decline in prices of telecommunication services; H2: There are similar trends in developed and developing countries, which are related to the number of the telecommunication services subscribers). Therefore, digital transformation and the effect of network externalities contribute to increasing the number of subscribers, reducing the number of networks (distortion of the market competition) and reducing the prices of telecommunication services.

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