Competitive relationships between traditional and contemporary telecommunication services in Taiwan

Telecommunications Policy 35 (2011) 543–554

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Telecommunications Policy URL: www.elsevierbusinessandmanagement.com/locate/telpol

Competitive relationships between traditional and contemporary telecommunication services in Taiwan Ya-Ching Lee n Institute of Communications Management, 70 Lieng-Hai Rd., National Sun Yat-sen University, Kaohsiung, Taiwan

a r t i c l e i n f o

abstract

Available online 5 May 2011

This study sets out to examine the competitive relationships that exist within the telecommunications market using the niche theory on the personal gratifications and system gratifications dimensions. The findings from the analysis of 363 survey responses indicate that traditional and contemporary telecommunication services offer different specializations to satisfy their consumers. Overall, mobile telecommunication services partially replace wired services, on personal gratifications dimensions in particular. The system gratifications dimensions of the wired telecommunication services facilitate the existence of wired services. New telecommunication services (3G and VoIP) partially replace old telecommunication services (home landline and 2G) in providing greater satisfaction in entertainment. The results also demonstrate that VoIP does not impose competitive displacement effects on home landline, 2G, and 3G services. Limitation and suggestions are discussed. & 2011 Elsevier Ltd. All rights reserved.

Keywords: Gratification Niche 3G VoIP Competition

1. Introduction With the rapid diffusion of new telecommunication technologies, there are now a variety of choices of telecommunication services available. According to International Telecommunication Union (ITU), there will be approximately 5.3 billion mobile cellular subscribers on a global scale. The second generation (2G) digital cellular systems are now widely used worldwide. (ITU, 2010). The development of third generation (3G) mobile telecommunication systems technology enables users to transmit data at higher speeds (Sharma, 2006). 3G services are predicted to become the mainstream telecommunication services of the future. It is estimated that there will be 940 million subscriptions to 3G services by the end of 2010 (ITU, 2010). 3G provides location-based services and advanced video applications, such as mobile videoconferencing, video-phone or mail, and various multimedia entertainment services (mobile television, video player and digital audio and/or video delivery) with seamless global roaming (Sharma, 2006). It is clearly of considerable interest and importance to investigate whether 3G services are likely to completely replace traditional telecommunication services (the current home landline services) as well as 2G services; this is of particular importance now that 3G services are being faced with increasing competition from ‘voice-over Internet protocol’ (VoIP) services, such as Skype, Vonage, Lingo. It should be noted that VoIP services have existed on the Internet since the early 1990s. However, the technology involved and the market penetration has become much more mature over recent years. According to a survey by Forrest, although only 5% of such households in the US and 2% of European users have currently switched from home landline telephones to VoIP, both the price and the features available through VoIP are slowly beginning to attract more home landline telephone customers (Cohen, 2007). For example, VoIP attracts 21 million subscribers and the majority (48%) is residential in the n

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United States (Lasar, 2010). In Taiwan, the new telecommunication services (3G and VoIP) attract users. 3G penetration rate is about 59% in 2009 (National Communication Commission, 2009). And, the VoIP are at their initial stage. Approximately 17% of broadband users subscribe to VoIP (Wu, 2009). How the new services different from traditional telecommunication services (home landline and 2G) in fulfilling users’ gratifications is important to telecommunication providers to improve the services and formulate competition strategies to satisfy consumers’ needs and wants. The importance of advanced telecommunication services has received considerable attention in a wide variety of prior studies. The majority of the prior studies within the literature tend to focus on the acceptance factors (Campbell, 2007; Mattila, 2005; Qi, Li, Li, & Shu, 2009) for, or customer satisfaction (Cha & Chan-Olmsted, 2007; Kim, Park, & Jeong, 2004; Leung & Wei, 2000) of, telecommunications services. Most of the studies do not emphasize on competition within the telecommunication service market as a whole. Thus, the extant literature lacks any comparative examination of traditional and contemporary telecommunication services from a competitive market perspective. Furthermore, the prior studies provide no explanation as to why people adopt new telecommunication services (3G and VoIP) and discontinue (or continue) their use of old telecommunication services. The competitiveness of the telecommunications market raises some interesting questions, such as: (i) can one type of telecommunications service satisfy the entire needs of all customers? (ii) do VoIP services pose a serious threat to the survival of traditional telecommunication (home landline telephone) services, as well as 2G and 3G services? (iii) is the emergence of VoIP likely to make home landline telephone systems obsolete? and (iv) do the traditional (home landline and 2G) and contemporary telecommunication (3G and VoIP) services complement each other, or is latter type of system likely to replace the former? The theory of the niche may assess these interesting issues because it predicts the existence, co-existence, and extirpation of media by investigating the competition between new and old media (Dimmick, Kline, & Stafford, 2000). In the context of the niche, gratifications can be used to index the nature of competitive relationships among entities such as media entities. This study focuses on learning whether the new types of telecommunication technologies and services provide better levels of gratification than older technologies provide. The study uses a framework constructed around gratification and niche theory. Through the use of empirical data, this study aims to provide a better understanding of the competitive attributes of advanced telecommunication services. The findings may ultimately further the forecast of the adoption and use of new telecommunication services as compared to the more traditional types of services. 2. Literature review 2.1. Telecommunications competition and product differentiation Telecommunications markets are in either oligopolistic or monopolistic competition depending on number of sellers, nature of product, and barriers to entry (Picard, 1989). In the former, few sellers compete with differentiation in product characteristics and advertising; in the latter, sellers compete with only price (Lacy & Vermeer, 1995). Product differentiation is one of crucial strategies for firms to offer similar products to appeal to the tastes and requirements of different consumers in a competitive market (Picard, 1989). It occurs when a firm’s ‘‘products are clearly preferred by at least some buyers over rival products at a given price’’ because of ‘‘differences in physical attributes, ancillary service, geographic location, information, and/or subjective image’’ (Scherer & Ross, 1990, p. 17). Successful differentiation creates brand loyalty and establishes an entry barrier for new entrants (Porter, 1985). 2.2. Niche theory ‘Niche theory’ originates from ecology. In ecology, species compete for the same scarce resources. The concept of the niche is the focus of the theory of ecological competition (Whittaker & Levin, 1975). A niche is defined as ‘the n-dimensional space which describes the characteristics of the resources a species needs for survival (Milne & Mason, 1989). As a result, these species evolve their competitive strategies to minimize competition for the resources (Ollerton, Stott, Allnutt, Shove, Taylor, & Lamborn, 2007). Niche theory predicts the existence, co-existence, and extirpation of species (Chase & Leibold, 2003; Hubbell, 2001; Ollerton et al., 2007; Silvertown, 2004). Researchers use niche theory to investigate the competition between new and old media (Dimmick et al., 2000). The niche of a species is determined by its position in the resource dimension within the market (Dimmick, 1997). There are essentially three types of resources within the competitive telecommunications market which attract competition: consumer satisfaction, consumer time, and revenue (e.g., operation, advertising, subscription revenues) (Dimmick, Chen, & Li, 2004). As many telecommunications companies (especially the new ones) do not reveal revenue information to the public, such data are difficult to obtain and their accuracy is questionable, competitive relationships can be forecasted in terms of consumer satisfaction (for example, Dimmick et al., 2004). Telecommunications market players may compete against each other for these same resources to gain different positions within the market (Dimmick, 1997; Dimmick et al., 2000). In a monopoly market, such as mobile telecommunications in Taiwan (Chen, 2000), firms differentiate their products to attract customers (Porter, 1985) to gain various competitive advantages. The approach of niche theory provides assessment to examine the monopolistic competitive relationships that exist between traditional and contemporary media, their differentiation strategies, as well as the influence that the new types of media can have upon traditional media (Dimmick et al., 2004). The theory facilitates the prediction of whether new types of telecommunications

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can subsume the position of traditional telecommunications, analyzing whether the competition arising from the emergence of the former can lead to the exclusion, replacement or displacement of the latter (Dimmick et al., 2004). Dimmick et al. (2000) develop several important indices as a means of investigating the competitive relationships that exist between the various types of media: niche breadth refers to the diversity of consumer needs served by a medium. If the niche breadth of a species is broad, the species then are considered generalists (Milne & Mason, 1989) and serve a broader spectrum of consumer needs for its survival within a volatile market (Dimmick, 1997). For example, television stations have broader niche breadth, insofar as they can attract more advertisers at national level than radio stations, most of which are confined to local advertising (Dimmick, 1997; Dimmick et al., 2000). Media with a narrow niche width are referred to as specialists (Milne & Mason, 1989). Niche overlap measures the intensity of pairwise competition between species by describing a situation in which different media offer the same or similar gratifications (Dimmick, 1997; Dimmick et al., 2000). For example, terrestrial television may provide audiences with similar gratification to that, which is provided by cable television. In fact, it is generally the case that the various types of media will be competing against each other for the same or similar resources (Dimmick et al., 2000). Niche superiority index provides an indication of which particular medium is superior to all other media (Dimmick et al., 2000). If cable television provides audiences with greater gratification than terrestrial television, cable is then the superior medium. By observing both niche overlap and niche superiority, one can predict the competitive displacement (partial replacement) and/or exclusion amongst the various types of media (Dimmick et al., 2000). If the degree of overlap is high and the new medium is superior to the traditional medium, the new medium will replace or partially replace the old medium (Dimmick, 1997; Dimmick et al., 2000). 2.3. Uses and gratification Numerous researchers adopt niche theory to evaluate the competitive situation within the media market (for example, Dimmick et al., 2000, 2004; Grace-Farfaglia, Dekkers, Sundararajan, Peters, & Park, 2006; Li, 2001; Ramirez, Dimmick, Feaster, & Lin, 2008). They suggest that gratifications may provide assessment for the declined use of traditional media. The uses and gratification assumes that consumers actively use and access media (such as television, Internet, mobile Internet, mobile phone) to fulfill their needs (Palmgreen, 1984) for sociability, entertainment, information-seeking (Cha & Chan-Olmsted, 2007; Charney & Greenberg, 2002; Feaster, 2009; Katz, Gurevitch, & Haas, 1973; Leung & Wei, 1998, 2000; Lin, 1993), education, habit (Charney & Greenberg, 2002), utility and fashion (Cha & Chan-Olmsted, 2007; Katz & Sugiyama, 2006; Leung & Wei, 1998, 2000). The uses and gratification theory argues that an audience’s prior motivation influences his/her communication choices and content (Palmgreen, Wenner, & Rosgengreen, 1985). The gratificationseeking of an audience is goal-oriented and utility driven to fulfill psychological needs (Katz et al. 1973; Leung & Wei, 1998). As more and more new technologies emerge, researchers use the uses and gratification paradigm to assess customers’ motivation for their choices of new telecommunications because the gratification-seeking view of media use is applicable to people’s motivation and usage of the new telecommunications. The analyses of the niche theory can be conducted from three gratifications dimensions—gratification sought, gratification obtained, and gratification opportunities. Most researchers assess the niche of a new medium from the dimension of gratification opportunities (for example, Dimmick et al., 2000, 2004; Li, 2001). Several researchers have advanced the theory of the niche. Ramirez et al. (2008) applied niche theory, social information processing theory, and the theory of electronic propinquity to examine the competition relationships among interpersonal media. They discover that instant messaging may displace email and landline telephone: The cell phone has the highest value of niche breadth, instant messaging the second highest. A high degree of substitutability presents between instant message and email, and, between instant message and cell phone. Later, Feaster (2009) extends the theory of the niche to include repertoire niche dimensions at the system population level (networked population). He discovers that repertoire niche dimensions of breadth, overlap, and superiority can predict media use. He also finds that individuals’ media use is interdependent of the social system: Individuals rely on several media repertoires to satisfy their various needs and fit their habits. Given audiences’ limited time and needs, the media compete to serve a role for each individual and for a population of media users. For the interpersonal medium, individuals obtain more gratifications if the population of medium-users helps them to accomplish social goals. Though the niche analysis from the dimension of gratification opportunities can signal characteristics of a medium, attributes of individual consumers are neglected. It should be noted that much attention has been focused on the importance of attributes of individual consumers using advanced telecommunication services in the prior studies. Several studies explore telecommunication usage from the dimensions of gratification sought and gratification obtained in terms of motivation and satisfaction. Kim et al. (2004) discover that call quality, value-added services and customer support have strong influences on customer satisfaction, and that switching costs have a significant impact on the switching barriers. Leung and Wei (2000) investigate 446 cellular phone users and find that mobility, immediacy, instrumentality and sociability are all factors affecting cellular phone adoption. They also discover that the use of cellular phone on buses, cars and trains, or in malls and restaurants, strongly affects both mobility and the appreciation of the immediate access that such services offer. Campbell (2007) explores the factors influencing the adoption of mobile phones and find that fashion positively affects such usage. Katz and Sugiyama (2006) investigate the relationship between fashion attentiveness and mobile phone usage amongst American and Japanese college students, with the results showing that young people see fashion as the main motivational aspect of such usage, and as such, regularly replace their mobile phones, essentially

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because the devices have become a symbol of fashion which effectively maintains their image and characteristics. Cha and Chan-Olmsted (2007) discover that entertainment, social interaction, and instrumentality factors each influence the acceptance of entertainment, communication and transaction services in the use of mobile phones. Yet, there has been no niche assessment of the competitive relationships existing in this particular field. Therefore, this study evaluates competitive relationships that exist within the telecommunications market with the niche theory from the dimension of gratification obtained to explain the decline in the use of traditional telecommunication services and the increase in the use of new telecommunication services. In addition, predictions about competitive relationships and suggestions for practical implications are difficult to pose because the niche theory is a macrolevel perspective (Ramirez et al., 2008). This paper examines both macrolevel and microlevel predictions in order to offer in-depth analysis about the competition, co-existence, and displacement of telecommunication services. More specifically, this paper explores the niches of home landline, 2G, 3G, and VoIP on the personal gratifications and system gratifications dimensions to understand the competition among these media. New telecommunication services have been developed into a useful tool for personal communication, information, and entertainment needs at work and in personal life. To survive in the market and displace the older telecommunication services, 3G and VoIP have to provide stable system at a reasonable price and allow users to access the system wherever and whenever they want. The personal dimension is sub-divided into fashion, sociability, entertainment, information-seeking, and utility. System dimension is sub-divided into economic factor, system quality, and mobility. Several statements are posed for each micro-dimension to ensure variable validity.

3. Research questions Based on the dimension of gratification and niche theory, this study sets out to explore the following research questions: RQ1: Is there a presence of displacement effects in telecommunication market? RQ2: What is the niche breadth of home landline telephone, 2G, 3G and VoIP services? RQ3: What is the extent of the niche overlap between the traditional (home landline & 2G) and new types (3G & VoIP) of telecommunication services within the dimension of gratification in the provision of telecommunication services? RQ4: What is the niche superiority for home landline telephone, 2G, 3G and VoIP services? RQ5: Are the new telecommunication services superior to traditional telecommunication services?

4. Method The first part of the questionnaire asking the respondents to complete the section on background information (such as age, gender, annual income, and occupation); screening questions were then asked to ensure targeted respondents. Two questions asked the respondents to describe the duration and frequency of their use of VoIP, 2G, and 3G cellular phone services. Then, respondents were asked to point out if they use homeland phone and 2G more often/less often/the same when they begin to use 3G and if they use homeland phone, 2G, and 3G more often/less often/the same when they begin to use VoIP on a 5-point Likert scale (1¼more often; 3 ¼the same; 5¼less often). Finally, respondents were asked gratification questions (see Table 1 for items and sources of the measurement). In the context of the niche, gratifications are resource dimensions which can be used to index the nature of competitive relationships among media entities. Eight gratification factors were developed from the extant literature which indicating these motives are associated with new media usage. The respondents were asked to grade their level of gratification using a five-point Likert scale, with ‘1’ representing ‘strongly disagree’ and ‘5’ representing ‘strongly agree’. All of the scales were modified to suit the context of this study. The questionnaires were pre-tested on 35 respondents in order to discuss the length and the format of the instrument, as well as the clarity and appropriateness of the wording of the scales, which resulted in the revision of some questions that were regarded as ambiguous. In order to effectively reach those respondents who already have some practical experiences in the use of all types of telecommunication services, including home landline telephone, 2G, 3G and VoIP services, an online field survey website was created for the purpose of collecting the empirical data. The survey questionnaire was then posted online in discussion groups, or on websites relating to VoIP, 2G and 3G telecommunication services (including the Karno Kingdom, Mobile01, phone daily, Cellular gogo, i club and digitimes websites). The questionnaire link was accompanied by a message in which the overall purpose of the study was clearly stated, and the website visitors were then asked to voluntarily participate in the study by following the hyperlink to the survey questionnaire form. A total of 391 questionnaires were returned; 28 of these were discarded as a result of incomplete questionnaires. The online survey therefore yielded 363 usable responses. Following Dimmick et al. (2000), this study uses three indices (niche breadth, niche overlap, and niche superiority) to observe the level of competition between home landline telephone, 2G, 3G and VoIP services: Niche breadth: Niche breadth (Eq. (1)) represents the diversity of consumer needs served by each type of media; specialist media serve a narrower spectrum of needs and have a narrower niche breadth, whereas generalist media serve a

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Table 1 Gratification items. Variables

Items

Source

Macrolevel

Microlevel

Personal Gratifications

Fashion

Have it as a status symbol

Leung and Wei (1998)

Sociability

Avoid looking old-fashioned without it Look fashionable Look stylish Schedule appointments Keep in contact with people I have no time to meet Organize social events Feel involved with what’s going on with other people

Leung and Wei (1998) Leung and Wei (2000) O’Keefe and Sulanowski (1995)

Improve the relationship with family Entertainment

Informationseeking

Enjoy the pleasure of contacting people Get companionship with people I know Have fun Seek information such as weather/traffic condition Find out consumer information

Economic factor

Keep up-to-date with social events Seek information such as traveling Do business transactions Allow people to find me easily Discuss business Find reasonable price

System quality

Choose freely price schedules Reduce costs Find variety of price schedule Ease to use it to do what I want to do

Utility

System gratifications

Mobility

Ease to learn to operate it Ease to use Speedy Stable transmission Accurate transmission Immediate access to anyone no matter where I am Call people whenever and wherever I want Access to the telecommunication devices whenever I want Elimination of the limitation to find the telecommunication devices on a fixed location

Leung and Wei (1998) O’Keefe and Sulanowski (1995) Leung and Wei (1998) O’Keefe and Sulanowski (1995)

Leung and Wei (1998)

Kim et al. (2004)

Cha and Chan-Olmsted (2007)

Kim et al. (2004)

Leung and Wei (1998)

broader spectrum of needs and will usually have broader niche breadth. The formula that Dimmick et al. (2000) used to measure niche breadth is as below: Niche breadth N P

B¼

n¼1

PK

GOn k ¼ 1 KðulÞ

N

 Kl ð1Þ

where B is the niche breadth ‘‘B’’ (ranges from 0 to 1), u the highest score in the scale items, l the lowest scores in the scale items, GO the gratification score, N the total of subjects who use the media, n the first subject, K the total of scales in the dimension, k the first gratification scale and Kl the number of scales in the dimension multiplied by the lowest score in that dimension. Niche overlap: Niche overlap (Eq. (2)), the formula used by Dimmick et al. (2000) to measure niche breadth, measures the resource overlap status between the various types of media. A larger number in the niche overlap formula indicates a lower level of resource overlap; under such a scenario, market competition will be less keen and the various types of media will have little influence over each other. Conversely, a smaller number in the niche overlap formula indicates much greater resource overlap, which implies that market competition is keener; this also means that the various types of media

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rely on similar resources and that any one media type can replace any other when faced with changes in the market (Dimmick et al., 2000). The formula is as below: Niche overlap

Oij ¼

rffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi 2 jÞ PK ðGoi GO K

XN

k¼1

ð2Þ

N

n¼1

O is the extent of niche overlap; i, j are the media; N is the subjects using media i and media j in the same time and n the first subject. Niche superiority: Niche superiority refers to the extent to which one type of media has superiority over others ‘‘from the forms of its resources’’ (Dimmick, 2003). A higher value for niche superiority reveals that this type of media can gain more resources from other inferior types of media and can therefore offer more gratification for its audiences. It is therefore likely that displacement effects will be discernible (Dimmick, 2003) (Eqs. (3) and (4)). Niche superiority PN Si 4 j ¼

n¼1

PK

k¼1

ðMÞi 4 j

ð3Þ

N

Niche superiority PN Sj 4 i ¼

n¼1

PK

k¼1

ðMÞj 4 i

ð4Þ

N

S is the niche superiority For each subject, the sum of all the differences that the value of the subject’s rating for the scale items on which i is rated greater than j is computed. Then, the values above of all the subjects is summed up and then divided by N (Dimmick, 2003).

Table 2 Profile of respondents. Measure

Items

Frequency

Percentage

Gender

Male Female o20 20–24 25–29 30–34 35–39 40–44 45–49 450 oHigh school High school Some college Bachelor’s degree Graduate degree

186 177 28 152 128 26 15 2 8 4 12 29 27 223 72

51.2 48.8 8.0 41.8 35.2 7.1 4.1 0.6 2.1 1.1 3.3 8.0 7.4 61.4 19.9

Income (annual)

oUSD5000 USD5001–10,000 USD10,001–15,000 USD15,001–20,000 USD$20,001–25,000 4USD25,001

92 48 34 104 73 12

25.1 13.2 9.4 28.9 20.1 3.3

Occupation

Student Service Manufacture Government Finance Teacher Military Transportation Construction Others

174 59 30 11 11 15 4 4 7 48

47.9 16.3 8.3 3.0 3.0 4.1 1.1 1.1 1.9 13.3

Age (years)

Education

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Table 3 Validity and credibility for gratification dimension. Gratification dimension

Personal gratifications Fashion Sociability Entertainment Information-seeking Utility System gratifications Perceived economic reasonbleness Perceived system quality Mobility Eigenvalue Reliability

Homeland telephone

2G

3G

VoIP

0.36 0.70 0.69 0.62 0.41

0.40 0.73 0.67 0.48 0.76

0.45 0.79 0.79 0.56 0.78

0.41 0.68 0.63 0.62 0.70

0.50

0.55

0.30

0.63

0.49 0.64

0.65 0.58

0.39 0.52

0.67 0.50

2.47 0.76

3.00 0.81

2.89 0.79

3.01 0.82

Note: N ¼363.

Table 4 Breadth values for the telecommunication services. Telecommunication services

Breadth

Home landline telephone 2G mobile 3G mobile VoIP

0.83 0.899 0.895 0.85

5. Results 5.1. Profile of the respondents Of all respondents participating in this study, 186 (51.2%) are male, and 177 (48.8%) are female (Table 2). 61.4% have a bachelor’s degree. As regards age, 8.0% of the samples are under the age of 20 years, 41.8% are between 20 and 24 years of age, 35.2% are between 25 and 29 years of age, 7.1% are in the 30–34 age group, 4.1% are in the 35–39 age group, and 2.7% are in the 40 Z age group. The majority of the respondents (49%) are in the USD$15,001–USD$25,000 annual income range.

5.2. Validity and reliability Construct validity is verified in this study by carrying out principal-axis factor analysis. The results of the factor analysis, which are presented in Table 3, demonstrate that there is one single-factor pattern, with all eight of the items for the four kinds of telecommunications exceeding the minimum factor loading of 0.3 (Gorsuch, 1983). The eigenvalues of all of the items also exceed 1.0. The Cronbach alpha coefficients of the measurement scales exhibit an acceptable threshold of 0.70 (Nunnally, 1978, p. 245). These results therefore reveal that the questionnaire adopted for this study has good internal consistency and validity.

5.3. Niche analysis The first research question concerns displacement effects. Following Ramirez et al. (2008), the t-tests reveal that since 3G subscribers use 3G, they significantly use less home landline (M¼3.83, SD¼0.813, t¼4.89, p o0.001) and 2G (M¼3.76, SD¼0.818, t ¼6.01, p o0.001). The tests also discover that since VoIP usage, respondents significantly use less 3G (M¼3.03, SD¼0.841, t ¼6.44, po0.001). The second research question seeks to determine the niche breadth of the four telecommunication services, defined as the extent to which a medium can satisfy users on a gratification dimension (Eq. (1)). The medium having bigger numbers (B) are generalists. The results (Table 4) show that 2G mobile telecommunication services have the highest score for the niche breadth measure (0.899), and also demonstrate that 2G services provide users with a broader range of needs on the gratification dimension. The next broadest niche is 3G services (0.895), although the figure is not much different from that for 2G services and the difference is negligible (0.004). VoIP services have a niche breadth of 0.85. Because they are closer to a score of ‘‘1’’ than ‘‘0,’’ they are more representative of being specialists. Traditional home landline telephone services

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Table 5 Superiority values and overlap for the telecommunication services. Telecommunication services

N

Home landline telephone 2G mobile Home landline telephone 3G mobile Home landline telephone VoIP 2G mobile 3G mobile 2G mobile VoIP 3G mobile VoIP nnn

Superiority values

344 160 159 160 159 159

t

Overlap ***

10.39 17.42 12.01 16.52 13.89 13.72 11.70 11.72 16.43 9.23 13.69 9.86

20.23

***

4.29

9.76

3.47

0.37

2.85

0.04

1.66

14.68***

2.39

5.95***

3.38

p o 0.01.

Table 6 Superiority values for each item of the gratification dimension. Gratification

Home landline telephone/2G

Home landline telephone/3G

Home landline telephone/VoIP

2G/3G

2G/VoIP

3G/VoIP

Personal gratifications Fashion Sociability Entertainment Information-seeking Utility

0.56 o 2.81 0.88 o 1.81 0.92 o 1.35 1.04 o1.33 0.35 o 4.22

0.42 o 3.06 1.23 o 1.46 0.76 o 1.60 1.13 o 1.61 0.48 o 3.01

0.81o 2.64 1.56 o 1.71 0.69o 1.78 1.66 41.20 0.94o 1.65

0.73o 1.26 1.534 0.91 0.59o 1.15 0.94o 1.06 1.164 0.61

1.36 40.98 1.79 40.84 0.80o 1.45 1.81 40.86 3.13 40.43

1.36 40.52 1.53 41.12 0.95 o 1 1.72 40.83 2.45 40.55

System gratifications Economic factor System quality Mobility

1.11 o 1.75 3.85 41 0.54 o 1.22

1.57 41.19 4.33 41.72 0.70 o1.04

1.22 o 1.71 4.12 40.95 1.37 40.54

1.514 0.69 2.414 1.27 1.554 1.06

1.43 o1.47 2.56 41.78 1.73 40.40

1.02 o1.83 1.92 o 2.36 1.22 40.54

Note: N ¼ 363.

have a niche breadth of 0.83, indicating that, as compared to the other types of telecommunication services, this is a much more representative of being a specialist. The third research question examines the extent of the niche overlap between the traditional and contemporary types of telecommunication services on the gratification dimension. To answer this question, the niche overlap formula (Eq. (2)) is computed. Niche overlap shows similarity of gratifications obtained from different media. A higher value demonstrates a lower degree of overlap/similarity between the niches of the two types of telecommunication services on the gratification dimension. Conversely, a lower value indicates a higher degree of overlap/similarity. The scale in this study ranges between 1 and 5, with the lower limit of the overlap measure being 0, and the upper limit being 4 (5–1). As shown in Table 5, the overlap measure between the 2G and 3G mobile services in the sample is 1.66, indicating that the niches of these two types of telecommunication services have a high degree of similarity on the gratification dimension. The two services with the second highest degree of similarity between their niches are 2G and VoIP, with an overlap measure of 2.39, followed by home landline telephone and VoIP services, with an overlap measure of 2.85. The overlap measure between 3G and VoIP services is 3.38, whilst the overlap between 3G and home landline telephone services is 3.47, indicating a moderately lower degree of niche overlap on the gratification dimension for the comparative niches of these services. The highest overlap value, at 4.29, is found between 2G and home landline telephone services, indicating that these two types of media have a lower degree of similarity on the gratification dimension. The fourth research question aims to determine competitive superiority between traditional and contemporary telecommunication services. The measure of competitive superiority (Eqs. (3) and (4)), reveals the extent to which a particular type of media has superiority over other media in the provision of gratification to its audience. A high value of superiority demonstrates that the media offer more customer satisfaction than inferior competitors. The results of the competitive superiority measure are presented in Table 5, which shows that 3G services have a significant level of competitive superiority over home landline telephone services (t ¼9.76, p ¼0.0001 o0.001) and VoIP services (t¼5.95, p ¼0.0001 o0.001), but not over 2G services. Indeed, the superiority of 2G services is itself significant over both home landline telephone services (t ¼20.23, p ¼0.0001 o0.001) and VoIP services (t¼14.68, p ¼0.0001 o0.001). No significant differences are found between wire telephone and VoIP services, or between 2G and 3G services.

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The fifth research question seeks to determine the ways in which the new telecommunication services are superior to traditional services and how they are different from each other. Table 6 provides the superiority scores for each gratification dimension with Eq. (3) and (4). The respondents generally felt that using wireless telecommunication services made them look fashionable, which clearly matches the focus of the telecommunication companies in their promotion of such wireless services—a stylishly designed cellular phone and more cool value-added services. The same situation is found in the sociability, information-seeking, utility and mobility variables, indicating that with their simple interface design, the functionalities provided by 2G and 3G services enable users to easily go online and effectively search for information. Wireless phones are portable; thus, users can readily communicate with each other, thereby maintaining personal relationships, or link to the Internet anytime and anywhere, making it easy to seek and locate information. These results are in line with the findings of the prior studies that fashion (Choi, Kim, & McMillan, 2009; Leung & Wei, 1998), sociability, information-seeking (Choi et al., 2009; Leung & Wei, 1998; O’Keefe & Sulanowski, 1995), utility and mobility (Leung & Wei, 1998; Mattila, 2005) are crucial aspects impacting on the adoption of cellular phone services. The respondents in this study indicate that traditional home landline telephone services have greater superiority over wireless mobile services in the utility dimension. This is perhaps because wireless telecommunication services are still limited (in terms of their reception scope and range) and also because some people may use the incoming call number facility in mobile services to screen unwanted calls. It should be noted that the superiority score for 2G services is higher than that for VoIP services, although the score for VoIP services is higher than that for 3G services. This could indicate the greater popularity within the market for 2G and VoIP services based upon the mature development of these services at a time when relatively few people are adopting 3G services. Anyone using 2G services cannot make calls to 3G users; 2G is therefore more useful than VoIP, and VoIP is more useful than 3G, to the extent that people can more easily make contact with each other. The respondents in this study appear to have more fun using wireless telecommunication media as compared to the use of home landline telephone services; however, this result, which is consistent with the findings of Leung and Wei (1998) and of Cha and Chan-Olmsted (2007) is not difficult to imagine, since wireless telecommunication services also provide a wider range of value-added services and online options. Nevertheless, in terms of the overall provision of value-added services, VoIP services are more attractive to the respondents in this study. Although 2G and 3G offer Internet services, their capability and interface design are limited by screen size and transmission speed; thus, respondents may find it more interesting to navigate on the Internet using VoIP. The respondents note that VoIP services are more reasonably priced than 2G and 3G, which is not surprising, as the costs for VoIP services are much lower than those for wireless telecommunication services. An interesting point is that 2G users report a more reasonable price for their services than home landline telephone service users, although this is not the case for 3G users. It is possible that since the 2G market is already mature, users can find many promotion packages within the market, and therefore feel that they can obtain the most reasonable price package to fit their own needs. It should be noted that home landline telephone services are regarded as being superior to wireless telecommunication services in terms of their ease of use. The respondents found 2G easier to operate than either 3G or VoIP services, and also noted that 2G had good system quality. This could, however, simply reflect the fact that most of the respondents are familiar with the use of 2G cellular phones, or that the development of 2G is now complete, with 2G service providers having designed user-friendly interfaces and functionality for consumers to operate with ease. However, the respondents report that 3G has the worst system quality. Given that 3G provides such a wide range of multimedia functions, it is likely that simple operation has not yet been developed, or that it is just not possible; the limited number of bases for stable and reliable transmission will also reduce the gratification of users, and therefore place additional constraints on its diffusion. 6. Discussion and conclusion Niche theory predicts the existence, displacement, and extirpation of market players (Dimmick et al., 2000) with indices of niche breadth, niche overlap, and niche superiority. This study uses niche theory to investigate the competitive relationships existing within the telecommunications market. The results are consistent with prior research suggesting that new innovations survive in the telecommunication market by differentiating gratification provisions in particular domains to meet customers’ needs (Bae, 1999; Feaster, 2009; Ferguson, 1997) and habits (Feaster, 2009). When facing with both old and modern needs, traditional and contemporary telecommunication services compete to provide solutions for both kinds of needs. This study discovers that they offer different specializations to satisfy their consumers. Overall, wireless telecommunication services have greater competitive advantages over fixed-line (wired) services. More specifically, mobile telecommunication services partially replace wired services, on personal gratifications dimensions in particular. The system gratifications dimensions of the wired telecommunication services facilitate the existence of wired services. New telecommunication services (3G and VoIP) partially replace old telecommunication services (home landline and 2G) in providing greater satisfaction in entertainment. The results also demonstrate that VoIP does not impose competitive displacement effects on home landline, 2G, and 3G services. Mobile phone services serve a broader spectrum of consumer needs than fixed-line telecommunication services. Since 2G provides generalist services, users of 2G services have the broadest range of needs met on the gratification dimension. It should be noted that the competition between 2G and VoIP services is strong; not only is 2G significantly superior to VoIP, but the results also reveal medium overlap between the two types of telecommunication services.

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Traditional home landline telephones provide specialist services, satisfied fewer consumer needs, but also having lower tolerance to market changes. The niche overlap between 2G and 3G services is obviously high with the greatest overlap on the gratification dimension; this indicates that competition for the same resources is more intense between these two types of telecommunication services than between other comparable services. The greatest dissimilarities are found between 2G and home landline telephone services. From a standpoint of the pure provision of telecommunication services, 3G and 2G services are significantly superior to home landline telephones and VoIP services. Indeed, VoIP services reveal no significant superiority over home landline telephone services, in terms of gratifying the needs of audiences. There is, however, medium overlap between these two types of telecommunications services. In addition, the new types of telecommunication services complement the traditional services in many ways: Mobile telecommunication services differentiate themselves from other services in terms of offering greater gratification on fashion, sociability, information-seeking, utility and mobility. Home landline telephone services offer the specialization of lower price than that of 3G services, as well as better system quality than mobile telecommunication services as a whole, whilst VoIP services specialize in offering lower prices than 2G, 3G and home landline telephone services, and better system quality than 3G services. There may, however, be little room for improvement in home landline telephone services because of the technology limitations. In order to gain competitive advantage, VoIP service providers need to create a sense of fashion, expand mobile VoIP market to offer mobility (although mobile VoIP is available, the market is premature.). VoIP providers can use their low rate policy and the wide variety of entertainment services to attract potential customers, so that network externality effects can be created. Users can then reach their friends, relatives and business partners within such networks to schedule appointments and strengthen their interpersonal relationships. No obvious displacement effects emerged potentially due to the novelty (at the time when this research was conducted) of 3G technologies. It should be noted that 2G services have the broadest niche, in terms of the more effective satisfaction of the needs of users than any of the other types of telecommunication services. Most 2G users take advantage of stable voice transmission. Its market maturity (total penetration has reached more than 100% since 2003) brings much convenience for people to communicate vocally with low costs (Wu, 2009). 3G is newer, there are many quality problems and limitations for 3G systems. Consumers often complain that the transmission is not stable, especially in rural areas (Chu & Chen, 2006; Lin, 2007). Inferior system quality impedes 3G from satisfying people’s needs. Higher costs are also issues for its low acceptance in Taiwan (Chu & Chen, 2006; Lin, 2007). The system stability and popularity of 2G represent a higher level of population niche proposed by Feaster (2009) discovering that individuals tend to use the particular interpersonal medium being used by certain numbers of networked population. The increasing numbers of others adopting an innovation enhance the value of that innovation (Katz & Shapiro, 1985). Thus, individuals tend to use 2G because they can obtain a greater and wider degree of gratification by communicating more people in 2G networks (2G 43G in Sociability and Utility) with fair price, good system quality, and mobility. The superiority of each gratification measures in Table 5 confirms the inference. Improvement in system quality is suggested. However, the result of this study clearly demonstrates that there is no one type of telecommunication service that could satisfy the needs of all consumers. The findings of this study also suggest that in order to boost penetration, 3G service providers can maintain their competitive advantages by continuing to meet the needs of customers for fashion seeking. Various reasonable price packages should be made available, as well as higher system quality, in order to convince potential users to make the move to 3G services. This paper makes two contributions to the literature. Firstly, it uses niche theory to provide empirical evidence on the competitiveness and displacement effects that exist within the telecommunication market. Secondly, there are several gaps in the relevant literature. The prior niche research emphasizes on gratification opportunities and rarely on consumer attributes. Studies on telecommunication consumer attributes tend to focus on the factors of acceptance or customer satisfaction, with no examination having been undertaken of the competitive relationships. This paper examines the niches of home landline, 2G, 3G, and VoIP on the personal gratifications dimension and on the system gratifications dimensions to provide a better understanding about the breadth, overlap, superiority, and competitive displacement of these media. Despite all of the care taken in the conduct of the present study, there are some limitations which should be noted and addressed in any future research. First of all, the concept provides a simple approach to quantifying the niche assumes a zero-sum game where one firm wins and another loses. The niche competition might present a short-run zero-sum nature. It might oversimplify the complicate market competition in the long-run. Though this study presents co-existence market situation with an assessment of product differentiation, an investigation of the competitive relationships should be undertaken over significant periods of time. It is therefore recommended that further studies should be undertaken in an attempt to determine whether there are any factors relating to market changes or technological changes that might alter the niche breadth, niche overlap and niche superiority of particular telecommunication services. Secondly, identification of market boundaries has been difficult and controversial (Milne & Mason, 1989). In niche analysis, choices of media affect the results with regard to the level of competition. With digital convergence, the boundary of computers, communications, consumer electronics, and digital contents become blurred (Cheng, 2004). Media now can provide communications, information, and telecommunications as a result of the integration of digital platforms (Hsieh, 2007, p. 28). As a result, telecommunications can compete with traditional media to provide video content; traditional media can compete with telecommunications to provide voice communication and data exchanges. To broadly define the market, competitors should be all included to present a complete picture of the market competition. Thirdly, in response to

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fierce media competition, media service providers will seek out new resources for their survival; for example, service providers within the radio industry compete for public relation activities sponsored by governments or private firms. Further investigation of new types of resources for which the various media compete (other than advertising, gratification and the gratification opportunities proposed by Dimmick et al. (2000)) may be helpful in providing a better understanding of the complete picture of the competitive relationships that exist within the media industry. In addition, telecommunication technologies have advanced rapidly. For example, the emergence of mobile VoIP may fulfill the micro-dimension of mobility. Though mobile VoIP market is immature at the current stage, it is worthwhile to observe its development and impacts on competition. Another example is the increasing growth of 3G. 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