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Behind the Scenes of the Telecommunications Miracle: An Empirical Analysis of the Indian Market

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  • Sara Biancini

Abstract

We analyze the demand and supply characteristics of the Indian telecommunications market, in order to assess the potential effectiveness of universal access policies in developing countries. We provide some empirical evidence on the supply and demand characteristics, using a small time-series-cross-section dataset on Indian States. We suggest that the price elasticity of demand for mainlines might be sensibly higher than the levels usually found in developed countries, while the crucial role of income and other sociodemographic variables seems to be confirmed. We also study the impact of cellular penetration, identifying a (positive) network effect in low penetration areas and some evidence of substitution (displacement) in the most developed ones. We finally analyze the supply side of the market, trying to assess the impact of market competition on investment: competition seemingly helps stimulating investment in the most developed areas, but has probably no significant impact in the less developed ones.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3286.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3286

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Keywords: telecommunications demand; universal service; competition; developing countries; India;

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  1. Daniel Ackerberg & Michael Riordan & Gregory Rosston & Bradley Wimmer, 2009. "Low-Income Demand for Local Telephone Service: Effects of Lifeline and Linkup," Discussion Papers, Stanford Institute for Economic Policy Research 08-047, Stanford Institute for Economic Policy Research, revised Aug 2009.
  2. Garbacz, Christopher & Thompson, Herbert G, Jr, 1997. "Assessing the Impact of FCC Lifeline and Link-Up Programs on Telephone Penetration," Journal of Regulatory Economics, Springer, Springer, vol. 11(1), pages 67-78, January.
  3. Garbacz, Christopher & Thompson, Herbert G, 2002. "Estimating Telephone Demand with State Decennial Census Data from 1970-1990," Journal of Regulatory Economics, Springer, Springer, vol. 21(3), pages 317-29, May.
  4. Rouvinen, Petri, 2004. "Diffusion of Digital Mobile Telephony - Are Devoloping Countries Different?," Discussion Papers, The Research Institute of the Finnish Economy 901, The Research Institute of the Finnish Economy.
  5. Gasmi, F. & Laffont, J. J. & Sharkey, W. W., 2000. "Competition, universal service and telecommunications policy in developing countries," Information Economics and Policy, Elsevier, Elsevier, vol. 12(3), pages 221-248, September.
  6. Clarke, George R.G. & Wallsten, Scott J., 2002. "Universal(ly bad) service - providing infrastructure services to rural and poor urban consumers," Policy Research Working Paper Series 2868, The World Bank.
  7. Gruber, Harald & Verboven, Frank, 1999. "The Diffusion of Mobile Telecommunications Services in the European Union," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2054, C.E.P.R. Discussion Papers.
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  9. Eriksson, Ross C & Kaserman, David L & Mayo, John W, 1998. "Targeted and Untargeted Subsidy Schemes: Evidence from Postdivestiture Efforts to Promote Universal Telephone Service," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 41(2), pages 477-502, October.
  10. F. Gasmi & J. J. Laffont & W. W. Sharkey, 1999. "Empirical Evaluation of Regulatory Regimes in Local Telecommunications Markets," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 8(1), pages 61-93, 03.
  11. Sridhar, Kala Seetharan & Sridhar, Varadharajan, 2007. "Telecommunications Infrastructure And Economic Growth: Evidence From Developing Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, Euro-American Association of Economic Development, vol. 7(2), pages 37-56.
  12. Kaserman, David L & Mayo, John W & Flynn, Joseph E, 1990. "Cross-Subsidization in Telecommunications: Beyond the Universal Service Fairy Tale," Journal of Regulatory Economics, Springer, Springer, vol. 2(3), pages 231-49, September.
  13. Lars-Hendrik Röller & Leonard Waverman, 1996. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," CIG Working Papers, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) FS IV 96-16, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  14. Hausman, Jerry & Tardiff, Timothy & Belinfante, Alexander, 1993. "The Effects of the Breakup of AT&T on Telephone Penetration in the United States," American Economic Review, American Economic Association, American Economic Association, vol. 83(2), pages 178-84, May.
  15. Madden, Gary & Coble-Neal, Grant, 2004. "Economic determinants of global mobile telephony growth," Information Economics and Policy, Elsevier, Elsevier, vol. 16(4), pages 519-534, December.
  16. Robert Jensen, 2007. "The Digital Provide: Information (Technology), Market Performance, and Welfare in the South Indian Fisheries Sector," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 122(3), pages 879-924, 08.
  17. Lisa M. George & Joel Waldfogel, 2006. "The New York Times and the Market for Local Newspapers," American Economic Review, American Economic Association, American Economic Association, vol. 96(1), pages 435-447, March.
  18. Garbacz, Christopher & Thompson, Herbert G, Jr, 2003. "Estimating Telephone Demand with State Decennial Census Data from 1970-1990: Update with 2000 Data," Journal of Regulatory Economics, Springer, Springer, vol. 24(3), pages 373-78, November.
  19. Das, Pinaki & Srinivasan, P. V., 1999. "Demand for telephone usage in India," Information Economics and Policy, Elsevier, Elsevier, vol. 11(2), pages 177-194, July.
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