Forecasting 3G mobile subscription in China: A study based on stochastic frontier analysis and a Bass diffusion model

This paper forecasts 3G mobile subscription in mainland China while incorporating regional disparity. First, using stochastic frontier analysis, this paper tries to measure the relative market potential of 2G mobile service in 31 Chinese provinces. Second, this paper estimates diffusion parameters, including innovation coefficient, imitation coefficient and potential market size, of 31 provinces from 2G data. Then, this paper forecasts 3G mobile subscription using the original Bass model. In particular, this paper uses the market potential of each province in a modified Bass model in order to estimate the maximum level of 3G subscription. Finally, the paper presents meaningful implications for policy makers and mobile network operators in China.

► There is still significant unexploited mobile subscription potential in most provinces in China. ► The cumulative number of 3G subscribers in China will be far beyond that of 2G subscribers by 2025. ► There is the regional gap in 3G subscription between the eastern region and other regions. ► The Eastern region has a faster diffusion speed and a larger market potential.