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Competition in Mobile Telephony in France and Germany

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Abstract

This paper provides an insight into the antitrust investigation initiated by the French competition authority, which found that mobile operators exchanged strategic information and agreed to fix market shares in years the 2000-2002. The empirical analysis is based on the comparison of mobile markets in France and Germany and uses aggregate industry-level data on subscriptions and prices. The penetration of mobile phones at the end of 1999 was higher in France than in Germany, but this situation was reversed by the end of 2002. In the same time period, minimum prices of mobile services in France, computed for a defined low-usage basket, were on average by about 58% lower than the corresponding prices in Germany. The results of binomial logit demand estimation suggest two explanations for this situation. First, there is a significant difference between price elasticities of demand in these two countries. Second, consumers seem to perceive mobile telephony as a substitute to fixed-line connection in France and as a complement in Germany. However, in a separate reduced-form estimation we do not find a significant effect of prices for fixed-line services on mobile prices in either country. Furthermore, the estimation results suggest that the share-fixing agreement in France could have slowed down subscriptions, but we fail to find that it had an adverse effect on prices.

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Bibliographic Info

Paper provided by NET Institute in its series Working Papers with number 07-24.

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Length: 28 pages
Date of creation: Sep 2007
Date of revision: Sep 2007
Handle: RePEc:net:wpaper:0724

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Keywords: mobile telephony; binomial logit; reduced-form; share-fixing;

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  1. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
  2. Rodini, Mark & Ward, Michael R. & Woroch, Glenn A., 0. "Going mobile: substitutability between fixed and mobile access," Telecommunications Policy, Elsevier, vol. 27(5-6), pages 457-476, June.
  3. Lukasz Grzybowski & Pedro Pereira, 2006. "Simulation of Merger in Mobile Telephony in Portugal," Working Papers 06-22, NET Institute, revised Oct 2006.
  4. Doganoglu, Toker & Grzybowski, Lukasz, 2007. "Estimating network effects in mobile telephony in Germany," Information Economics and Policy, Elsevier, vol. 19(1), pages 65-79, March.
  5. Gruber, H. & Verboven, F.L., 1998. "The Diffusion of Mobile Telecommunications Services in the European Union," Discussion Paper 1998-138, Tilburg University, Center for Economic Research.
  6. Cadima, Nuno & Pita Barros, Pedro Luis, 2000. "The Impact of Mobile Phone Diffusion on the Fixed-Link Network," CEPR Discussion Papers 2598, C.E.P.R. Discussion Papers.
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Cited by:
  1. Lukasz Grzybowski, 2012. "Fixed-to-Mobile Substitution in the European Union," Working Papers 271, Economic Research Southern Africa.
  2. Chiraz Karamti & Lukasz Grzybowski, 2010. "Hedonic study on mobile telephony market in France: pricing–quality strategies," Netnomics, Springer, vol. 11(3), pages 255-289, October.
  3. Lukasz Grzybowski & Frank Verboven, 2013. "Substitution and Complementarity between Fixed-line and Mobile Access," Working Papers 13-09, NET Institute.

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