Drivers of the Telecommunication Industry

Chapter 1 was devoted to understanding the impact of externality on telecommunication networks. In addition to externality, the fast evolving technology underlying the telecommunication space continues to shape telecommunication networking in fundamental ways at an incredible pace. This chapter focuses on the factors that set the telecommunications industry apart from other industries. We present technology as a prime driver of the telecommunications industry. Our rationale is based on the fact that reducing costs of telecommunication technology while enhancing its functionality and performance will continue to expand the breadth and depth of telecommunication applications. Furthermore, telecommunication network-based services can displace other commodities and services enhancing demand for such services and applications on a continuing basis in the foreseeable future. Telecommunication business constitutes about 15% of the gross domestic product (GDP) of the USA. At an estimated 18.494 trillion dollars of GDP in 2016, the telecommunication business is worth 2.77 trillion dollars in the USA. There are two raw materials that constitute the underlying technology of telecommunication networks: Bandwidth and Processing speed. In Sects. 2.1 and 2.2, we discuss the cost trends of these two technologies. Section 2.4 considers the utility of telecommunication services from an economic standpoint. Sections 2.5 and 2.6 consider the demand and cross elasticity of telecommunication services, respectively. Section 2.8 summarizes this chapter.