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Substitution between fixed-line and mobile access: the role of complementarities

Author

Listed:
  • Lukasz Grzybowski

    () (Telecom ParisTech
    University of Cape Town)

  • Frank Verboven

    () (University of Leuven and CEPR (London))

Abstract

Abstract We study substitution from fixed-line to mobile voice access, and the role of various complementarities that may slow down this process. We use survey data of 160,363 households from 27 EU countries during 2005–2011. We estimate a discrete choice model where households may choose one or both voice technologies, possibly in combination with internet access. We obtain the following main findings. First, there is significant fixed-to-mobile substitution, especially in recent years: without mobile telephony, fixed-line penetration would have been 14.1 % higher at the end of 2011. But there is substantial heterogeneity across households and EU regions, with a stronger substitution in Central and Eastern European countries. Second, the decline in fixed telephony has been slowed down because of a significant complementarity between the fixed-line and mobile connections offered by the fixed-line incumbent operator. This gives the incumbent a possibility to protect its position in the fixed-line market, raising market share by 2.7 %, and to leverage it into the mobile market, raising market share by 5.4 % points. Third, the decline in fixed telephony has also been slowed down because of the complementarity with broadband internet: the introduction of DSL avoided an additional decline in fixed-line penetration of 8.7 % points at the end of 2011. The emergence of fixed broadband has thus been the main source through which incumbents maintain their strong position in the fixed-line network.

Suggested Citation

  • 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.
  • Handle: RePEc:kap:regeco:v:49:y:2016:i:2:d:10.1007_s11149-015-9290-2
    DOI: 10.1007/s11149-015-9290-2
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    References listed on IDEAS

    as
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    Cited by:

    1. repec:kap:regeco:v:52:y:2017:i:3:d:10.1007_s11149-017-9344-8 is not listed on IDEAS
    2. Lange, Mirjam R. J. & Saric, Amela, 2016. "Substitution between fixed, mobile, and voice over IP telephony: Evidence from the European Union," DICE Discussion Papers 221, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    3. repec:kap:regeco:v:52:y:2017:i:1:d:10.1007_s11149-017-9336-8 is not listed on IDEAS
    4. Wellmann, Nicolas, 2017. "OTT-Messaging and Mobile Telecommunication: A Joint Market? An Empirical Approach," 28th European Regional ITS Conference, Passau 2017 169503, International Telecommunications Society (ITS).
    5. Lange, Mirjam R. J., 2017. "Tariff diversity and competition policy: Drivers for broadband adoption in the European Union," DICE Discussion Papers 262, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    6. Petulowa, Marc & Liang, Julienne, 2016. "Mobile-only consumers arise from heterogeneous valuation of fixed services," 27th European Regional ITS Conference, Cambridge (UK) 2016 148699, International Telecommunications Society (ITS).
    7. 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).
    8. Wellmann, Nicolas, 2017. "OTT-messaging and mobile telecommunication: A joint market? - An empirical approach," DICE Discussion Papers 256, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

    More about this item

    Keywords

    Fixed-to-mobile substitution; Incumbency advantage; Broadband access;

    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
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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