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Fixed-to-Mobile Substitution in the European Union

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  • Lukasz Grzybowski

Abstract

This paper analyzes substitution between access to fixed-line and mobile telephony in the European Union. We estimate a structural model of household's demand for: (i) fixed-line only; (ii) mobile only; (iii) and both fixed-line and mobile access. We find that decreasing prices for mobile services increase the share of 'mobile only' households and decrease shares of 'fixed only' and 'fixed + mobile' households which suggests substitution between fixed-line and mobile connections. Moreover, growing Internet and DSL usage increase the share of 'fixed + mobile' households, which suggests that households keep their fixed line connection to access Internet. However, spread of 3G and cable modem broadband access decreases the share of 'fixed + mobile' households and increases the share of 'mobile only' households. Hence, in the future, fixed-line connection used for Internet access may be substituted by mobile broadband, as was in the case of voice telephony. On the other hand, bundling increases the share of 'fixed + mobile' households and decreases the shares of 'mobile only' and 'fixed only' households, which suggests that firms which provide both fixed-line and mobile services may slow down the substitution by bundling products.

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Bibliographic Info

Paper provided by Economic Research Southern Africa in its series Working Papers with number 271.

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Length: 29 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:rza:wpaper:271

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Keywords: Fixed-To-Mobile Substitution; Fixed Broadband; Mobile Broadband;

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References

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  1. Lukasz Grzybowski & Chiraz Karamti, 2010. "Competition In Mobile Telephony In France And Germany," Manchester School, University of Manchester, vol. 78(6), pages 702-724, December.
  2. Ahn, Hyungtaik & Lee, Myeong-Ho, 1999. "An econometric analysis of the demand for access to mobile telephone networks," Information Economics and Policy, Elsevier, vol. 11(3), pages 297-305, September.
  3. Nakil Sung & Yong-Hun Lee, 2002. "Substitution between Mobile and Fixed Telephones in Korea," Review of Industrial Organization, Springer, vol. 20(4), pages 367-374, June.
  4. Wolfgang Briglauer & Anton Schwarz & Christine Zulehner, 2011. "Is fixed-mobile substitution strong enough to de-regulate fixed voice telephony? Evidence from the Austrian markets," Journal of Regulatory Economics, Springer, vol. 39(1), pages 50-67, February.
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Cited by:
  1. Lukasz Grzybowski & Frank Verboven, 2013. "Substitution and Complementarity between Fixed-line and Mobile Access," Working Papers 13-09, NET Institute.
  2. Barth, Anne-Kathrin & Heimeshoff, Ulrich, 2012. "How large is the magnitude of fixed-mobile call substitution? Empirical evidence from 16 Europen countries," 23rd European Regional ITS Conference, Vienna 2012 60391, International Telecommunications Society (ITS).

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