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Substitution between Fixed-line and Mobile Access: the Role of Complementarities

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  • Grzybowski, Lukasz
  • Verboven, Frank

Abstract

We study substitution from fixed-line to mobile voice access, and the role of various complementarities that may influence this process.We use rich survey data on 160,363 households from 27 EU countries during 2005-2012. We estimate a discrete choice model where households may choose one or both 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% higher in 2012. 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 fixed-line and mobile connections offered by the fixed-line incumbent operator. This gives the incumbent a possibility to maintain to some extent its position in the fixed-line market, and to leverage it into the mobile market. Third, the decline in fixed telephony has been slowed down because of the complementarity with broadband internet: the introduction of DSL avoided an additional decline in fixed-line penetration of almost 9% in 2012. The emergence of fixed broadband has thus been the main source through which incumbents maintain their strong position in the fixed-line network.

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  • Grzybowski, Lukasz & Verboven, Frank, 2014. "Substitution between Fixed-line and Mobile Access: the Role of Complementarities," CEPR Discussion Papers 10045, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10045
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    Cited by:

    1. Lange, Mirjam R.J. & Saric, Amela, 2016. "Substitution between fixed, mobile, and voice over IP telephony – Evidence from the European Union," Telecommunications Policy, Elsevier, vol. 40(10), pages 1007-1019.
    2. Macher, JT & Mayo, JW & Ukhaneva, O & Woroch, GA, 2017. "From universal service to universal connectivity," Department of Economics, Working Paper Series qt7jp5v5nz, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    3. 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.
    4. Liang, Julienne & Petulowa, Marc, 2018. "Mobile-only consumers arise from heterogeneous valuation of fixed services," Telecommunications Policy, Elsevier, vol. 42(2), pages 145-153.
    5. Sobolewski, Maciej & Kopczewski, Tomasz, 2017. "Estimating demand for fixed-line telecommunication bundles," Telecommunications Policy, Elsevier, vol. 41(4), pages 227-241.
    6. Wellmann, Nicolas, 2017. "OTT-messaging and mobile telecommunication: A joint market? - An empirical approach," DICE Discussion Papers 256, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    7. Wellmann, Nicolas, 2019. "Hello . . . Are You Still There? An Empirical Analysis How Market Structure Affects Quality of Mobile Networks," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203579, Verein für Socialpolitik / German Economic Association.
    8. Engin Zeydan & Omer Dedeoglu & Yekta Turk, 2021. "Performance monitoring and evaluation of FTTx networks for 5G backhauling," Telecommunication Systems: Modelling, Analysis, Design and Management, Springer, vol. 77(2), pages 399-412, June.
    9. Hasbi, Maude, 2015. "Universal service obligations and public payphone use: Is regulation still necessary in the era of mobile telephony?," Telecommunications Policy, Elsevier, vol. 39(5), pages 421-435.
    10. 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).
    11. 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).
    12. Wellmann, Nicolas, 2019. "Are OTT messaging and mobile telecommunication an interrelated market? An empirical analysis," Telecommunications Policy, Elsevier, vol. 43(9).
    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. Ryan Hawthorne & Lukasz Grzybowski, 2019. "Narrowing the 'Digital Divide': The Role of Complementarities Between Fixed and Mobile Data in South Africa," CESifo Working Paper Series 7711, CESifo.
    15. Gantumur, Tseveen & Henseler-Unger, Iris & Neumann, Karl-Heinz, 2016. "Wohlfahrtsökonomische Effekte einer Pure LRIC-Regulierung von Terminierungsentgelten," WIK Discussion Papers 408, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    16. Wang, Ao, 2021. "A BLP Demand Model of Product-Level Market Shares with Complementarity," The Warwick Economics Research Paper Series (TWERPS) 1351, University of Warwick, Department of Economics.
    17. Iaria, Alessandro & WANG, Ao, 2020. "Identification and Estimation of Demand for Bundles," CEPR Discussion Papers 14363, C.E.P.R. Discussion Papers.
    18. 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).
    19. Vélez-Velásquez, Juan Sebastián, 2019. "Merger effects with product complementarity: Evidence from Colombia’s telecommunications," Information Economics and Policy, Elsevier, vol. 49(C).
    20. Jeffrey T. Macher & John W. Mayo & Olga Ukhaneva & Glenn A. Woroch, 2017. "From universal service to universal connectivity," Journal of Regulatory Economics, Springer, vol. 52(1), pages 77-104, August.
    21. Iaria, Alessandro & Wang, Ao, 2021. "A note on stochastic complementarity for the applied researcher," Economics Letters, Elsevier, vol. 199(C).

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    More about this item

    Keywords

    broadband access; fixed-to-mobile substitution; incumbency advantage;
    All these keywords.

    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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