Today, there are over 6 billion people in the world. Out of those 6 billion people, 4.6 billion people have access to a cell phone/ telecommunication device. Technological advances has allowed the cell phone market to flourish and grow since the late 20th century. In fact, in the last 20 years cell phones have evolved from landlines to smart phones. While there are many effects from the growth of the mobile phone market, it is important to observe and analyze the positive and negative externalities on which the mobile phone market presents to both producers and consumers.
The cell phone market has grown in the past few years, many firms have entered and exited the market. Once a highly competitive market is now condensed to four main telecommunication companies and many smaller and relatively insignificant firms. (2003 Market Share Chart Below)
These tech giants dominate the industry with widespread coverage, diverse phone plans, and affordable prices. This makes smaller firms unable to compete on a wide scale, signifying a high barrier of entry. The scale and reach of Verizon, Sprint, AT&T, and T-Mobile is difficult to compete with as they transform the mobile phone market from highly competitive to mostly oligopolistic as the maintain at least 90% share of the market. (Shown Below)
What exactly does this mean? It means that the mobile phone market is highly concentrated between 4 wireless companies that successfully survived competition while also forcing smaller firms to exit the market or merge together. The market is fierce despite the 4 major companies compete to sell the same phones along with similar cell phone data plans and coverage. Understanding the positive and negative externalities of the cell phone market allows us to easily understand the transformation of the mobile phone market.
Externalities are critical to determine the external effects generated by economic activities. They determine whether firms or markets fail or succeed. By studying the costs and benefits presented by externalities helps measure economic efficiency in terms of economic price. Positive Externalities generates benefits on a nonparticipant in a market transaction. In the mobile phone market, there are three main positive externalities that are prevalent: (1) faster and more private communication; (2) Constant internet access; (3) Easy to Use. All sorts of people from around the global are now able to communicate from different regions within mere seconds/minutes. Moreover, this also contributes to the rapid globalization in the past century. As more and more people are connected to the World Wide Web, information and ideas are easily able to be disseminated to billions of people.
Constant internet access allows a reliable way to access a global repository of knowledge that is the Internet. Sure, not all phones have data coverage nor do all phones offer unlimited talk and text, however they do allow people to easily communicate with one another rather than slower methods. Fierce competition between the major phone service providers have introduced new plans for consumers. Cell coverage and date are often advertised as better than their competitors, claiming to reach farther and faster at a price typically lower or more attractive. Insurance and cases have become prevalent in the market due to the increasing complexity, fragility, and cost of newer cellphones/smartphones. Smartphones helped flourish the earbud market since they have the capability to listen to music through headphones on their phones. Sofware developments and applications differentiates one smartphone from another (iOS v. Android). Negative externalities, unlike positive externalities, impose costs on a third party as a consequence of a transaction. Four major negative externalities are: (1) Distraction; (2) Privacy and Security Risks; (3) Pollution; (4) Less Physical Communication.
Mobile phones make it easy to look up almost anything you want to see, from funny cat pictures to scientific theories. As more and more people have access to cell phones, the more phones can become distractions in daily life. An example would be texting while driving, while the driver is enjoying whatever it is they’re looking at, they’re also endangering the lives of others by not paying attention to the road and possibly causing a fatal accident. Workplace efficiency seems to be another, time spent not working reduces the work and output desired by the employer. Cell phones are popular sources to check social media. By posting or geotagging your location, you have made you and the people around you prone to privacy and security risks. The same could be said each time someone checks their bank account through their phones. Phones are prone to privacy and security risks much like other electronic equipment, the difference being that a lot of people depend on their phones with personal information. Personal phones are globally popular, 4.6 billion people utilize phones. How many of those people use multiple phones? How many of those people properly discard their phones? How much pollution was released to create those phones? How about from phones that have been improperly disposed of?
The electronic devices that allows us to digest information also produces massive amounts of E-waste that harm the environment. Lastly, cell phones and similar electronic devices such as tablets and computers have further disconnected people from physical interactions. Instead of meeting face to face, some prefer to play video games online, share pictures with one another, or simply just text or call rather than physically interacting with them.
Society is depending more and more on technology, cell phones are no exceptions. While cell phones allow people to connect with one another, it also poses many problems on society. According to the market continuing growth, it’s evident that the positive externalities outweigh the negative externalities.