This paper presents a cross-national analysis on the effect of the politics and regulatory governance on the diffusion of mobile cellular technology. There has been a substantial literature devoted to the regulatory practices both in the developing and developed world. However, we take a different perspective as we examine the uncertainty in the regulatory decision making process engendered by differences in the structures of various regulatory bodies. We show that uncertainty caused by the regulatory environment adversely affects the investment decisions of the operators and vendors in the telecommunication market, ceteris paribus. We also show that the structure of the regulatory body has high correlation with the uncertainties in the regulatory environment. The operators and vendors in the telecommunication market adjust their responses as the regulatory directives alter. However, hasty decisions, inclination towards micro-management, lack of long term planning, and frequent change in regulatory directives render the firms unable to anticipate the regulatory change. The uncertainty in the regulatory decision making process therefore, can hinder the operator’s plans of network expansion, introduction of new technology, price structure and can ultimately hinder the process of diffusion of technology. Our hypothesis is when all things are equal, operators would invest more and keep prices low in an environment where regulatory decisions are not subject to frequent change. We investigate the phenomenon by trying to answer the question: Does frequently altered regulatory directives negatively impact the operator’s decisions of network expansion? The number of revisions per year in the directives on various issues related to telecommunication market has been used as the proxy to measure uncertainty in the regulatory decision making process. The impact is measured on the operator’s investment plan and price structure. The second research question that we investigate in this paper is: what cause the regulatory uncertainty? Telecommunication regulatory authorities around the world are of different types- some are independent, some are semi-independent and some work as dependent organizations within the bureaucracy. The structure of the organization in which decisions are made may affect whether the organization has a predisposition to be more lenient or more stringent in taking public policy. Decisions made by the regulators are influenced by the structure of their governing boards. In countries where the regulators are mostly engineers, focus is on solving problems through technology. In contrast, in boards composed of lawyers the focus is on rights and liabilities based on legal principles. Along with this phenomenon, the personal relationship of the regulators with the policy makers of the Government, role of judiciary, the way the bureaucracy deals with public pressure and the extent to which it gets influenced by the national and multinational operators also have impact on various decisions. Our hypothesis is, a regulatory body that enjoys independence (both financial and political) and has the presence of experts from various backgrounds (engineers, economists, lawyers) can reduce the regulatory uncertainty. Hence the research question we try to answer is: do independence and the structure of the regulatory board reduce regulatory uncertainty? We conduct an econometric analysis of the effect of regulatory uncertainty using a unique multi-country panel dataset accumulated from various data sources including the ITU, Telecom Policy Institute and regulatory authorities. The dataset has twenty years-long (1990-2009) information regarding telecommunication regulatory environment, structure of the bodies, political pressure, discretionary limits, demographic and mobile-industry data for 127 countries of the world. The analysis shows that structure of the regulatory board is highly correlated with the regulatory uncertainty, which significantly affects the relative rate of telecommunication infrastructure deployment. We have also found that uncertainty on the regulatory environment causes price volatility in the retail market and slows the growth of the technology diffusion. The study provides new insights into what factors should be adopted in order to increase effective telecommunication regulation
