IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Indicators of wireline/wireless competition in the market for telecommunication services

  • Krzysztof Dzieciolowski
  • John Galbraith

We address evidence that competition from wireless telecommunications may already be having a substantial effect on the market for wireline services, despite historical estimates of price elasticity suggesting substantial market power (weak competition) in wireline services, considering both the elasticity argument per se and the observable recent trends in the wireline market. Among other points, we suggest that: Arguments based on observed historical elasticities may be weak in cases where there exists a potential competitor offering a service whose price was substantially higher in the past, but where the price difference between the relevant products has lessened. In these cases, the competitor may have had little effect on demand in the past, but can have a much greater effect as the price difference narrows. We can use a logistic-type demand relation, with the price difference as a key factor, to model such situations. In the present case, doing so produces results compatible with a substantially higher absolute elasticity of demand than would be observable in historical data. With respect to observed trends in demand, we note that the total number of wirelines serviced by Bell Canada showed a remarkably stable pattern of seasonal and trend variation which has been interrupted quite abruptly over the last four + years. The change, in the direction of actual demand well below levels compatible with the previous trend, indicates substantial changes in the nature of the wireline market. Since the total market for telecommunications services has continued to expand over this time, this suggests changes in consumers' choices between different modes of telecommunication. Relating the wireline displacements to the numbers of wireless customers (for primary wirelines) or wireless and high-speed internet (for secondary and total wirelines) allows us to estimate wireline losses, producing numbers compatible with a reduction of up to 8% in the total size of the market for fixed wirelines as of the end of 2003 (after excluding approximately 3% of the competitive losses), relative to what demand would have been had the previous growth trend continued. Nous soutenons la thèse selon laquelle la concurrence dans les télécommunications sans fil a déjà un effet important sur les marchés de services filaires, malgré les prévisions historiques de la théorie de l'élasticité-prix suggérant un pouvoir dominant sur le marché (concurrence défavorable) des services filaires. Nous traiterons l'argument de l'élasticité en soi, ainsi que de récentes tendances observables dans le marché des services filaires. Nous suggérons, entre autres que : Les arguments fondés sur les élasticités historiques observées peuvent être faibles dans les cas où il existe un compétiteur potentiel offrant un service dont les tarifs étaient beaucoup plus élevés dans le passé, mais dont la différence de prix entre les produits pertinents s'amoindrit. Dans ces cas, le compétiteur peut avoir eu une faible influence sur la demande dans le passé, mais est susceptible d'avoir une influence beaucoup plus grande lorsque la différence de prix se resserre. Nous pouvons utiliser un modèle de type logistique pour l'offre et la demande ayant comme facteur clé la différence de prix pour décrire de telles situations. Dans ce cas-ci, une telle méthode produirait des résultats compatibles avec une élasticité de la demande plus forte en absolu que celle observée dans les données historiques. En ce qui a trait aux tendances observées de la demande, nous avons noté que le nombre total de services filaires desservis par Bell Canada suit un modèle remarquablement stable de variation selon les saisons et les tendances mais qui a été soudainement interrompu durant les quatre dernières années. Ce changement, orienté vers la demande actuelle bien en dessous des niveaux compatibles avec la tendance précédente, indique des modifications substantielles de la nature même du marché des services filaires. Puisque le marché global des services de télécommunications a continué de prendre de l'expansion depuis ce temps, cela démontre des changements dans le processus décisionnel des clients entre les différents modes de télécommunication. La correspondance entre les déplacements des services filaires et le nombre de clients utilisant les services sans fil (pour le service filaire de base) ou sans fil et Internet haute-vitesse (pour le service filaire secondaire ou total) nous permet d'estimer les pertes de services filaires, produisant des nombres compatibles avec une réduction approximative de près de 8 % de la taille totale du marché des réseaux filaires pour la fin de 2003 (en excluant environ 3 % de pertes concurrentielles), comparativement à ce que la demande aurait été si la croissance avait continué.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by CIRANO in its series CIRANO Project Reports with number 2004rp-21.

in new window

Length: 27 pages
Date of creation: 01 Oct 2004
Handle: RePEc:cir:cirpro:2004rp-21
Contact details of provider: Postal:
1130 rue Sherbrooke Ouest, suite 1400, Montréal, Quéc, H3A 2M8

Phone: (514) 985-4000
Fax: (514) 985-4039
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Barros, Pedro Luis Pita & Cadima, Nuno, 2000. "The Impact of Mobile Phone Diffusion on the Fixed-Link Network," CEPR Discussion Papers 2598, C.E.P.R. Discussion Papers.
  2. 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.
  3. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cir:cirpro:2004rp-21. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.