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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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    1. Lukasz Grzybowski & Pedro Pereira, 2006. "Simulation of Merger in Mobile Telephony in Portugal," Working Papers 06-22, NET Institute, revised Oct 2006.
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    Citations

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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. Briglauer, Wolfgang & Cambini, Carlo & Melani, Sauro, 2016. "How to fill the digital gap? The (limited) role of regulation," ZEW Discussion Papers 16-002, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. repec:eee:joreco:v:39:y:2017:i:c:p:11-22 is not listed on IDEAS
    4. 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).
    5. 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.
    6. Briglauer, Wolfgang & Cambini, Carlo & Melani, Sauro, 2016. "How to Fill the Digital Gap? The (Limited) Role of Regulation," Annual Conference 2016 (Augsburg): Demographic Change 145480, Verein für Socialpolitik / German Economic Association.
    7. Juan Vélez, 2017. "Merger Effects with Product Complementarity: Evidence from Colombia’s Telecommunications," Borradores de Economia 1018, Banco de la Republica de Colombia.
    8. Dorothee Bär & Peter Knauth & Wilhelm Eschweiler & Wolfgang Kopf & Valentina Daiber & Wilhelm Dresselhaus & Iris Henseler-Unger & Christian Wernick & Justus Haucap & Ulrich Heimeshoff & Mirjam Lange &, 2016. "Wie viel ist genug? Breitbandausbau in Deutschland," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(20), pages 03-28, October.

    More about this item

    Keywords

    Broadband; Market definition; Multinomial logit; Mixed logit;

    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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