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Market definition for broadband internet in Slovakia – Are fixed and mobile technologies in the same market?

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  • Grzybowski, Lukasz
  • Nitsche, Rainer
  • Verboven, Frank
  • Wiethaus, Lars

Abstract

This paper uses a rich survey of 6446 households in Slovakia to estimate price elasticities of demand for Internet access, and draw implications for market definition. We estimate a mixed logit model, in which households choose between different broadband technologies: DSL, cable modem, fibre, WiFi and mobile. We find that a number of household characteristics influence the technology choices, and there is also significant unobserved heterogeneity. Demand for Internet access is highly price sensitive. The price elasticity of demand for DSL is −3.02, which falls in the middle of the range of elasticities for the other technologies. Furthermore, the price elasticity of demand at the level of all fixed broadband technologies (DSL+cable modem+fibre+WiFi) is equal to −1.98. For a reasonable range of profit margins, this estimate implies that mobile broadband should be included in the relevant antitrust market of fixed broadband. Our findings have implications for competition policy in Central and Eastern European countries where due to poor copper networks mobile broadband is an important alternative to fixed broadband.

Suggested Citation

  • Grzybowski, Lukasz & Nitsche, Rainer & Verboven, Frank & Wiethaus, Lars, 2014. "Market definition for broadband internet in Slovakia – Are fixed and mobile technologies in the same market?," Information Economics and Policy, Elsevier, vol. 28(C), pages 39-56.
    • Handle: RePEc:eee:iepoli:v:28:y:2014:i:c:p:39-56
    DOI: 10.1016/j.infoecopol.2014.06.002
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    References listed on IDEAS

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    Cited by:

    1. Grzybowski, Lukasz & Hasbi, Maude & Liang, Julienne, 2018. "Transition from copper to fiber broadband: The role of connection speed and switching costs," Information Economics and Policy, Elsevier, vol. 42(C), pages 1-10.
    2. Kwak, Kyu Tae & Lee, Seung Yeop & Ham, Minjeong & Lee, Sang Woo, 2021. "The effects of internet proliferation on search engine and over-the-top service markets," Telecommunications Policy, Elsevier, vol. 45(8).
    3. Grzybowski, Lukasz & Liang, Julienne, 2014. "Estimating demand for quadruple-play tariffs: The impact on consumer surplus," 25th European Regional ITS Conference, Brussels 2014 101375, International Telecommunications Society (ITS).
    4. Hawthorne, Ryan & Grzybowski, Lukasz, 2021. "Distribution of the benefits of regulation vs. competition: The case of mobile telephony in South Africa," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    5. Lukasz Grzybowski & Ryan Hawthrone, 2019. "Benefits of regulation vs competition where inequality is high: The case of mobile telephony in South Africa," Working Papers 791, Economic Research Southern Africa.
    6. Jiao Xu & Chris Forman & Yu Jeffrey Hu, 2019. "Battle of the Internet Channels: How Do Mobile and Fixed-Line Quality Drive Internet Use?," Service Science, INFORMS, vol. 30(1), pages 65-80, March.
    7. Quaglione, Davide & Matteucci, Nicola & Furia, Donatella & Marra, Alessandro & Pozzi, Cesare, 2020. "Are mobile and fixed broadband substitutes or complements? New empirical evidence from Italy and implications for the digital divide policies," Socio-Economic Planning Sciences, Elsevier, vol. 71(C).
    8. Ryan Hawthorne & Lukasz Grzybowski, 2019. "Narrowing the 'Digital Divide': The Role of Complementarities Between Fixed and Mobile Data in South Africa," CESifo Working Paper Series 7711, CESifo.
    9. Lukasz Grzybowski & Frank Verboven, 2016. "Substitution between fixed-line and mobile access: the role of complementarities," Journal of Regulatory Economics, Springer, vol. 49(2), pages 113-151, April.
    10. Dorothee Bär & Peter Knauth & Wilhelm Eschweiler & Wolfgang Kopf & Valentina Daiber & Wilhelm Dresselhaus & Iris Henseler-Unger & Christian Wernick & Justus Haucap & Ulrich Heimeshoff & Mirjam Lange &, 2016. "How Much Is Enough? Broadband in Germany," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(20), pages 03-28, October.
    11. Lindlacher, Valentin, 2021. "Low demand despite broad supply: Is high-speed Internet an infrastructure of general interest?," Information Economics and Policy, Elsevier, vol. 56(C).
    12. Lukasz Grzybowski & Frank Verboven, 2013. "Substitution and Complementarity between Fixed-line and Mobile Access," Working Papers 13-09, NET Institute.
    13. Briglauer, Wolfgang & Cambini, Carlo & Melani, Sauro, 2016. "How to Fill the Digital Gap? The (Limited) Role of Regulation," VfS Annual Conference 2016 (Augsburg): Demographic Change 145480, Verein für Socialpolitik / German Economic Association.
    14. Hökelekli, Gizem & Lamey, Lien & Verboven, Frank, 2017. "The battle of traditional retailers versus discounters: The role of PL tiers," Journal of Retailing and Consumer Services, Elsevier, vol. 39(C), pages 11-22.
    15. Sobolewski, Maciej & Kopczewski, Tomasz, 2017. "Estimating demand for fixed-line telecommunication bundles," Telecommunications Policy, Elsevier, vol. 41(4), pages 227-241.
    16. Vélez-Velásquez, Juan Sebastián, 2019. "Merger effects with product complementarity: Evidence from Colombia’s telecommunications," Information Economics and Policy, Elsevier, vol. 49(C).

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    More about this item

    Keywords

    Broadband; Market definition; Multinomial logit; Mixed logit;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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