IDEAS home Printed from https://ideas.repec.org/p/yon/wpaper/2014rwp-68.html
   My bibliography  Save this paper

Fixed and mobile broadband; Are they substitutes or complements?

Author

Listed:
  • Jinsoo Bae

    (Ohio State University)

  • Yun Jeong Choi

    (Yonsei University)

  • Jong-Hee Hahn

    (Yonsei University)

Abstract

This paper investigates whether fixed and mobile broadband services are substitutes or complements using firm-level panel data obtained from three major telecommunications operators in South Korea. We employ a multi-level demand model based on Hausman et al. (1994), which allow for the possibility of complementarity between differentiated services. The estimated price elasticities of demand indicate that mobile broadband is a (week) substitute for fixed broadband while fixed broadband is complementary to mobile broadband. This is in contrast with the previous studies based on logit models which essentially assume substitution between different technologies. This result implies that fixed and mobile internet services constitute distinctive antitrust markets at least in the early stage of mobile broadband development.

Suggested Citation

  • Jinsoo Bae & Yun Jeong Choi & Jong-Hee Hahn, 2014. "Fixed and mobile broadband; Are they substitutes or complements?," Working papers 2014rwp-68, Yonsei University, Yonsei Economics Research Institute.
    • Handle: RePEc:yon:wpaper:2014rwp-68
    as

    Download full text from publisher

    File URL: http://121.254.254.220/repec/yon/wpaper/2014rwp-68.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Vogelsang, Ingo, 2010. "The relationship between mobile and fixed-line communications: A survey," Information Economics and Policy, Elsevier, vol. 22(1), pages 4-17, March.
    2. Jerry Hausman & Gregory Leonard & J. Douglas Zona, 1994. "Competitive Analysis with Differentiated Products," Annals of Economics and Statistics, GENES, issue 34, pages 143-157.
    3. repec:adr:anecst:y:1994:i:34:p:06 is not listed on IDEAS
    4. Lee, Sangwon & Marcu, Mircea & Lee, Seonmi, 2011. "An empirical analysis of fixed and mobile broadband diffusion," Information Economics and Policy, Elsevier, vol. 23(3), pages 227-233.
    5. Grzybowski, Lukasz, 2014. "Fixed-to-mobile substitution in the European Union," Telecommunications Policy, Elsevier, vol. 38(7), pages 601-612.
    6. Ward, Michael R. & Woroch, Glenn A., 2010. "The effect of prices on fixed and mobile telephone penetration: Using price subsidies as natural experiments," Information Economics and Policy, Elsevier, vol. 22(1), pages 18-32, March.
    7. Pereira, Pedro & Ribeiro, Tiago, 2011. "The impact on broadband access to the Internet of the dual ownership of telephone and cable networks," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 283-293, March.
    8. Takanori Ida & Toshifumi Kuroda, 2006. "Discrete Choice Analysis of Demand for Broadband in Japan," Journal of Regulatory Economics, Springer, vol. 29(1), pages 5-22, January.
    9. Gruber, Harald & Verboven, Frank, 2001. "The diffusion of mobile telecommunications services in the European Union," European Economic Review, Elsevier, vol. 45(3), pages 577-588, March.
    10. Ward, Michael R. & Zheng, Shilin, 2012. "Mobile and fixed substitution for telephone service in China," Telecommunications Policy, Elsevier, vol. 36(4), pages 301-310.
    11. Flamm, Kenneth & Chaudhuri, Anindya, 0. "An analysis of the determinants of broadband access," Telecommunications Policy, Elsevier, vol. 31(6-7), pages 312-326, July.
    12. Mélisande Cardona & Anton Schwarz & B. Burcin Yurtoglu & Christine Zulehner, 2009. "Substitution Between DSL, Cable, and Mobile Broadband Internet Services," Contributions to Economics, in: Peter Curwen & Justus Haucap & Brigitte Preissl (ed.), Telecommunication Markets, pages 95-111, Springer.
    13. Wulf, Jochen & Brenner, Walter, 2013. "Analyzing competitive effects between fixed and mobile broadband," 24th European Regional ITS Conference, Florence 2013 88532, International Telecommunications Society (ITS).
    14. Banerjee, Aniruddha & Ros, Agustin J., 2004. "Patterns in global fixed and mobile telecommunications development: a cluster analysis," Telecommunications Policy, Elsevier, vol. 28(2), pages 107-132, March.
    15. Grajek, Michal & Kretschmer, Tobias, 2009. "Usage and diffusion of cellular telephony, 1998-2004," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 238-249, March.
    16. Jerry A. Hausman, 1996. "Valuation of New Goods under Perfect and Imperfect Competition," NBER Chapters, in: The Economics of New Goods, pages 207-248, National Bureau of Economic Research, Inc.
    17. Nakil Sung & Yong-Hun Lee, 2002. "Substitution between Mobile and Fixed Telephones in Korea," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(4), pages 367-374, June.
    18. Jang, Show-Ling & Dai, Shau-Chi & Sung, Simona, 2005. "The pattern and externality effect of diffusion of mobile telecommunications: the case of the OECD and Taiwan," Information Economics and Policy, Elsevier, vol. 17(2), pages 133-148, March.
    19. Galperin, Hernán & Ruzzier, Christian A., 2013. "Price elasticity of demand for broadband: Evidence from Latin America and the Caribbean," Telecommunications Policy, Elsevier, vol. 37(6), pages 429-438.
    20. M.R. Narayana, 2010. "Substitutability Between Mobile And Fixed Telephones: Evidence And Implications For India," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 22(1), pages 1-21, March.
    21. Srinuan, Pratompong & Srinuan, Chalita & Bohlin, Erik, 2012. "Fixed and mobile broadband substitution in Sweden," Telecommunications Policy, Elsevier, vol. 36(3), pages 237-251.
    22. 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.
    23. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
    24. 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.
    25. Yannelis, Demetrius & Christopoulos, Apostolos G. & Kalantzis, Fotis G., 0. "Estimating the demand for ADSL and ISDN services in Greece," Telecommunications Policy, Elsevier, vol. 33(10-11), pages 621-627, November.
    26. Lukasz Grzybowski & Frank Verboven, 2013. "Substitution and Complementarity between Fixed-line and Mobile Access," Working Papers 13-09, NET Institute.
    27. Mélisande Cardona & Anton Schwarz & B. Yurtoglu & Christine Zulehner, 2009. "Demand estimation and market definition for broadband Internet services," Journal of Regulatory Economics, Springer, vol. 35(1), pages 70-95, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alderete, María Verónica, 2022. "The effect of broadband on economic growth in Latin America: an approach based on a simultaneous equations model," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    2. Leurcharusmee, Supanika & Sirisrisakulchai, Jirakom & Suriya, Komsan & Keesookpun, Chutipong & Srinuan, Pratompong, 2017. "Fixed-to-Mobile Substitution: Effects of Mobile Broadband Subscription on Fixed Broadband Termination," 14th ITS Asia-Pacific Regional Conference, Kyoto 2017: Mapping ICT into Transformation for the Next Information Society 168513, International Telecommunications Society (ITS).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Srinuan, Pratompong & Srinuan, Chalita & Bohlin, Erik, 2012. "Fixed and mobile broadband substitution in Sweden," Telecommunications Policy, Elsevier, vol. 36(3), pages 237-251.
    3. Oğuz, Fuat & Akkemik, K. Ali & Göksal, Koray, 2015. "Toward a wider market definition in broadband: The case of Turkey," Utilities Policy, Elsevier, vol. 37(C), pages 111-119.
    4. Vélez-Velásquez, Juan Sebastián, 2019. "Merger effects with product complementarity: Evidence from Colombia’s telecommunications," Information Economics and Policy, Elsevier, vol. 49(C).
    5. Grzybowski, Lukasz, 2014. "Fixed-to-mobile substitution in the European Union," Telecommunications Policy, Elsevier, vol. 38(7), pages 601-612.
    6. Suárez, David & García-Mariñoso, Begoña, 2013. "Which are the drivers of fixed to mobile telephone access substitution? An empirical study of the Spanish residential market," Telecommunications Policy, Elsevier, vol. 37(4), pages 282-291.
    7. Meade, Nigel & Islam, Towhidul, 2015. "Forecasting in telecommunications and ICT—A review," International Journal of Forecasting, Elsevier, vol. 31(4), pages 1105-1126.
    8. Lukasz Grzybowski & Frank Verboven, 2013. "Substitution and Complementarity between Fixed-line and Mobile Access," Working Papers 13-09, NET Institute.
    9. Vogelsang, Ingo, 2010. "The relationship between mobile and fixed-line communications: A survey," Information Economics and Policy, Elsevier, vol. 22(1), pages 4-17, March.
    10. Ward, Michael R. & Zheng, Shilin, 2012. "Mobile and fixed substitution for telephone service in China," Telecommunications Policy, Elsevier, vol. 36(4), pages 301-310.
    11. Hoernig, Steffen & Bourreau, Marc & Cambini, Carlo, 2015. "Fixed-mobile substitution and termination rates," Telecommunications Policy, Elsevier, vol. 39(1), pages 65-76.
    12. Nakamura, Akihiro, 2015. "Mobile and fixed broadband access services substitution in Japan considering new broadband features," Telecommunications Policy, Elsevier, vol. 39(2), pages 140-154.
    13. 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.
    14. Jitendra Parajuli & Kingsley E. Haynes, 2017. "Broadband and narrowband Internet in Nepal," Asia-Pacific Journal of Regional Science, Springer, vol. 1(1), pages 85-97, April.
    15. Barth, Anne-Kathrin & Heimeshoff, Ulrich, 2014. "What is the magnitude of fixed–mobile call substitution? Empirical evidence from 16 European countries," Telecommunications Policy, Elsevier, vol. 38(8), pages 771-782.
    16. Ghosh, Saibal, 2016. "Does mobile telephony spur growth? Evidence from Indian states," Telecommunications Policy, Elsevier, vol. 40(10), pages 1020-1031.
    17. Aron Debra J. & Ingraham Allan T., 2012. "The Effects of Legacy Pricing Regulation on Adoption of Broadband Service in the United States," Review of Network Economics, De Gruyter, vol. 11(4), pages 1-38, December.
    18. Mirjam R. J. Lange, 2017. "Tariff diversity and competition policy: drivers for broadband adoption in the European Union," Journal of Regulatory Economics, Springer, vol. 52(3), pages 285-312, December.
    19. Ezzat Riham Ahmed, 2017. "Fixed-Mobile Substitution in MENA Countries: The Future of Fixed-Line Markets," Review of Network Economics, De Gruyter, vol. 16(4), pages 387-417, December.
    20. Šaric, Amela & Lange, Mirjam R. J., 2014. "Deregulating fixed voice services? Empirical evidence from the European Union," 25th European Regional ITS Conference, Brussels 2014 101385, International Telecommunications Society (ITS).

    More about this item

    Keywords

    Mobile broadband; Fixed broadband; Substitution; Complementarity; Multi-level demand model.;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:yon:wpaper:2014rwp-68. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: YERI (email available below). General contact details of provider: https://edirc.repec.org/data/eryonkr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.