| This dissertation focuses on telephone demand and the identification and measurement of network externalities. The value of the telephone depends not only on the presence of other users either to call or to receive, but also on the number of subscribers on the same network system. Therefore, the conventional telephone demand study that assumes away network externality will seriously underestimate telephone benefits, especially when the telephone system is growing fast.; Over the past fifteen years, the telephone system of Thailand has expanded rapidly. This dissertation is the first attempt to assess the impact of network expansion on the demand for basic and cellular telephone services, specifically for the Bangkok metropolitan market between 1978-1995. Unlike other empirical studies that identified network externality with demand for access, the present study constructed a theoretical framework of telephone demand, based upon the conventional access-usage dichotomy, to show that the network effect can be assessed in terms of consumer surplus associated with the conceptual demand for use.; Due to Thailand's market conditions, the observed demand for use is not part of a simultaneous system. Thus, the study estimated this demand equation and used the results to derive the slope of the conceptual demand, which is the valid basis for the assessment of the network effect. The results indicate that the magnitude of network externality is quite substantial. In particular, the external benefits of a massive network expansion in the early 1990's that elevated the Bangkok metropolitan areas' subscriber penetration from 10 to 32 subscribers per 100 population is worth between 10.2 and 39.8 billion real bahts per annum. This amounts to between 5.5 and 7.3 times larger than the estimated total access revenues. |
