The diffusion of many previous innovations eventually slowed down and reached an equilibrium level. Despite continued rapid growth, it is possible that the diffusion of mobile telephony will also begin to decelerate and reach a saturation level. Whether universal service can be achieved with the help of mobile telephony will therefore depend considerably on whether the diffusion of mobile telephony will stagnate before such universality is reached. One key question in developing countries is whether inequality will limit or delay the adoption of mobile telephony.

The goal of this dissertation is to contribute to a better understanding of these issues. It investigates mobile telephony diffusion focusing on the effects of income and other forms of inequality on two core aspects of diffusion: the saturation level (market potential) and the speed of diffusion. The dissertation theorizes that market potential and the rate of acceptance are functions of demand-side factors, supply-side factors, and social conditions and tests corresponding hypotheses empirically.

A two-step approach was used to accomplish these goals. In a first step, three statistical models of the diffusion of innovations (Bass, Gompertz, and logistic) were employed to estimate market potential and parameters reflecting diffusion speed for 160 countries. The factors determining the variation of these parameter estimates across countries were examined in a second step. For this purpose, regression analysis was used to investigate the effects of supply-side, demand-side, and socio-cultural factors on the diffusion parameters. Thus, diffusion models were used predominantly to obtain estimates for the dependent variables used in the second part of the analysis. This second phase is the main innovation and contribution of the dissertation.

The study revealed that income inequality had a statistically significant negative effect on the speed of diffusion but not on the market potential. The dissertation also found a statistically significant association between price and market potential. The effect of income inequality on the speed of diffusion implies that it will most likely take longer to achieve universal service in a society with highly unequal income distribution. The association between price and market potential suggests that regulators could accelerate the diffusion process by coaxing suppliers to provide inexpensive calling plans. Overall, the dissertation contributes additional theoretical insights and empirical evidence to the mobile telephony and the universal service literature.