IDEAS home Printed from https://ideas.repec.org/p/net/wpaper/0610.html
   My bibliography  Save this paper

The Impact on Broadband Access to the Internet of the Dual Ownership of Telephone and Cable Networks

Author

Listed:
  • Pedro Pereira

    (Autoridade da Concorrencia, Portugal)

  • Tiago Ribeiro

    (Indera)

Abstract

In Portugal, the telecommunications incumbent o®ers broadband access to the Inter- net, both through digital subscriber line and cable modem. In this article, we estimate the impact on broadband access to the Internet of the structural separation of these two businesses. We use a panel of consumer level data and a discrete choice model to estimate the price elasticities of demand and the marginal costs of broadband access to the Internet. Based on these estimates, we simulate the e®ect on prices and social welfare of the structural separation. Our results indicate that the structural separation would lead to substantial price reductions. For broadband clients, on average, each household would save 3:37 euros per month, or 14% of the current price levels. Overall, on average, each household would save 2:73 euros per month, or 14% of the current price levels. We test the robustness of our results in terms of: (i) the estimates of the demand elasticities, (ii) the strategic behavior of the ¯rms, and (iii) the market share estimates. There is no evidence of collusion.

Suggested Citation

  • Pedro Pereira & Tiago Ribeiro, 2006. "The Impact on Broadband Access to the Internet of the Dual Ownership of Telephone and Cable Networks," Working Papers 06-10, NET Institute, revised Aug 2006.
  • Handle: RePEc:net:wpaper:0610
    as

    Download full text from publisher

    File URL: http://www.netinst.org/Pereira-Ribeiro.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:adr:anecst:y:1994:i:34:p:06 is not listed on IDEAS
    2. Gagnepain, Philippe & Pereira, Pedro, 2007. "Entry, costs reduction, and competition in the Portuguese mobile telephony industry," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 461-481, June.
    3. Goolsbee Austan, 2006. "The Value of Broadband and the Deadweight Loss of Taxing New Technology," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-31, April.
    4. Madden, Gary & Savage, Scott J. & Coble-Neal, Grant, 1999. "Subscriber churn in the Australian ISP market," Information Economics and Policy, Elsevier, vol. 11(2), pages 195-207, July.
    5. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, vol. 49(1), pages 105-130, January.
    6. Aviv Nevo, 2000. "Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 395-421, Autumn.
    7. Anderson, Simon P & de Palma, Andre, 1992. "Multiproduct Firms: A Nested Logit Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 40(3), pages 261-276, September.
    8. Hausman, Jerry & McFadden, Daniel, 1984. "Specification Tests for the Multinomial Logit Model," Econometrica, Econometric Society, vol. 52(5), pages 1219-1240, September.
    9. Nevo, Aviv, 2001. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Econometrica, Econometric Society, vol. 69(2), pages 307-342, March.
    10. Steven Berry & James Levinsohn & Ariel Pakes, 2004. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 68-105, February.
    11. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
    12. Jean‐Pierre Dubé, 2005. "Product Differentiation and Mergers in the Carbonated Soft Drink Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(4), pages 879-904, December.
    13. McFadden, Daniel, 1987. "Regression-based specification tests for the multinomial logit model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 63-82.
    14. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
    15. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    16. Brito, Duarte & Pereira, Pedro, 2008. "Investment and welfare implications of the ownership structure of overlapping networks," Information Economics and Policy, Elsevier, vol. 20(1), pages 38-53, March.
    17. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, February.
    18. Duarte Brito & Pedro Pereira, 2006. "Some Investment and Competition Implications of the Ownership Structure of Overlapping Networks," Working Papers 11, Portuguese Competition Authority.
    19. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
    20. Madden, Gary & Simpson, Michael, 1996. "A probit model of household broadband service subscription intentions: A regional analysis," Information Economics and Policy, Elsevier, vol. 8(3), pages 249-267, September.
    21. Baker, Jonathan B & Baresnahan, Timothy F, 1985. "The Gains from Merger or Collusion in Product-differentiated Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 33(4), pages 427-444, June.
    22. Jerry A. Hausman & J. Gregory Sidak & HalJ. Singer, 2001. "Cable Modems and DSL: Broadband Internet Access for Residential Customers," American Economic Review, American Economic Association, vol. 91(2), pages 302-307, May.
    23. Pinkse, Joris & Slade, Margaret E., 2004. "Mergers, brand competition, and the price of a pint," European Economic Review, Elsevier, vol. 48(3), pages 617-643, June.
    24. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    25. Ivaldi, Marc & Verboven, Frank, 2005. "Quantifying the effects from horizontal mergers in European competition policy," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 669-691, December.
    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. Srinuan, Pratompong & Srinuan, Chalita & Bohlin, Erik, 2012. "Fixed and mobile broadband substitution in Sweden," Telecommunications Policy, Elsevier, vol. 36(3), pages 237-251.
    2. Halmenschlager, Christine & Mantovani, Andrea, 2017. "On the private and social desirability of mixed bundling in complementary markets with cost savings," Information Economics and Policy, Elsevier, vol. 39(C), pages 45-59.
    3. 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.
    4. Brito, Duarte & Pereira, Pedro & Ramalho, Joaquim J.S., 2013. "Mergers, coordinated effects and efficiency in the Portuguese non-life insurance industry," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 554-568.
    5. 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).
    6. Hawthorne, Ryan & Grzybowski, Lukasz, 2021. "Distribution of the benefits of regulation vs. competition: The case of mobile telephony in South Africa," International Journal of Industrial Organization, Elsevier, vol. 74(C).
    7. Ryan Hawthorne & Lukasz Grzybowski, 2019. "Benefits of Regulation vs. Competition Where Inequality Is High: The Case of Mobile Telephony in South Africa," CESifo Working Paper Series 7703, CESifo.
    8. Sunada, Mitsuru & Noguchi, Masato & Ohashi, Hiroshi & Okada, Yosuke, 2011. "Coverage area expansion, customer switching, and household profiles in the Japanese broadband access market," Information Economics and Policy, Elsevier, vol. 23(1), pages 12-23, March.
    9. Nicolle, Ambre, 2016. "Are consumers myopic? Evidence from handset and mobile services choices," 27th European Regional ITS Conference, Cambridge (UK) 2016 148693, International Telecommunications Society (ITS).
    10. Lukasz Grzybowski & Pedro Pereira, 2006. "Simulation of Merger in Mobile Telephony in Portugal," Working Papers 06-22, NET Institute, revised Oct 2006.
    11. Hidalgo, Julian & Oviedo, Juan D., 2014. "The impact of Broadband quality standards on Internet services market structure in Colombia," 25th European Regional ITS Conference, Brussels 2014 101435, International Telecommunications Society (ITS).
    12. Pereira, Pedro & Ribeiro, Tiago & Vareda, João, 2013. "Delineating markets for bundles with consumer level data: The case of triple-play," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 760-773.
    13. Juan Daniel Oviedo & Julian Hidalgo, 2014. "The impact of broadband quality standards on Internet services market structure In colombia," Documentos de Trabajo 012232, Universidad del Rosario.
    14. Zucchini, Leon & Claussen, Jörg & Trüg, Moritz, 2013. "Tariff-mediated network effects versus strategic discounting: Evidence from German mobile telecommunications," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 751-759.
    15. Pedro Pereira & Tiago Ribeiro, 2018. "Evaluating Partial Divestitures When Vertical Relations are Important," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(2), pages 321-345, September.

    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. Jerome Foncel & Marc Ivaldi & Jrisy Motis, 2008. "An Econometric Workbench for Comparing the Substantive and Dominance Tests in Horizontal Merger Analysis," Working Papers 0833, University of Crete, Department of Economics.
    2. Céline Bonnet & Pierre Dubois, 2010. "Inference on vertical contracts between manufacturers and retailers allowing for nonlinear pricing and resale price maintenance," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 139-164, March.
    3. Pereira, Pedro & Ribeiro, Tiago & Vareda, João, 2013. "Delineating markets for bundles with consumer level data: The case of triple-play," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 760-773.
    4. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, August.
    5. Brito, Duarte & Pereira, Pedro & Ramalho, Joaquim J.S., 2013. "Mergers, coordinated effects and efficiency in the Portuguese non-life insurance industry," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 554-568.
    6. Rachel Griffith & Lars Nesheim & Martin O'Connell, 2018. "Income effects and the welfare consequences of tax in differentiated product oligopoly," Quantitative Economics, Econometric Society, vol. 9(1), pages 305-341, March.
    7. Susan Athey & Guido W. Imbens, 2007. "Discrete Choice Models With Multiple Unobserved Choice Characteristics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1159-1192, November.
    8. Victor Aguirregabiria & Margaret Slade, 2017. "Empirical models of firms and industries," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1445-1488, December.
    9. Ciara Whelan & Patrick P. Walsh & Franco Mariuzzo, 2004. "EU merger control in differentiated product industries," Open Access publications 10197/138, School of Economics, University College Dublin.
    10. Steven T. Berry & Philip A. Haile, 2014. "Identification in Differentiated Products Markets Using Market Level Data," Econometrica, Econometric Society, vol. 82, pages 1749-1797, September.
    11. Leheyda, Nina, 2008. "Market Power, Multimarket Contact and Pricing: Some Evidence from the US Automobile Market," ZEW Discussion Papers 08-118, ZEW - Leibniz Centre for European Economic Research.
    12. Genakos, Christos D., 2004. "Differential merger effects: the case of the personal computer industry," LSE Research Online Documents on Economics 6726, London School of Economics and Political Science, LSE Library.
    13. Lee Branstetter & Chirantan Chatterjee & Matthew J. Higgins, 2016. "Regulation and welfare: evidence from paragraph IV generic entry in the pharmaceutical industry," RAND Journal of Economics, RAND Corporation, vol. 47(4), pages 857-890, November.
    14. Yukihiro Kidokoro, 2015. "Discrete choice models for multicategory goods," GRIPS Discussion Papers 15-08, National Graduate Institute for Policy Studies.
    15. Pedro Pereira & Tiago Ribeiro, 2018. "Evaluating Partial Divestitures When Vertical Relations are Important," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(2), pages 321-345, September.
    16. Nevo, Aviv, 2001. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Econometrica, Econometric Society, vol. 69(2), pages 307-342, March.
    17. Peter Davis & Pasquale Schiraldi, 2014. "The flexible coefficient multinomial logit (FC-MNL) model of demand for differentiated products," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 32-63, March.
    18. Kidokoro, Yukihiro, 2016. "A micro foundation for discrete choice models with multiple categories of goods," Journal of choice modelling, Elsevier, vol. 19(C), pages 54-72.
    19. Filistrucchi, L. & Gerardin, D. & van Damme, E.E.C. & Keunen, S. & Klein, T.J. & Michielsen, T.O. & Wileur, J., 2010. "Mergers in Two-Sided Markets - A Report to the NMa," Other publications TiSEM f901d1fe-8878-444e-a685-8, Tilburg University, School of Economics and Management.
    20. Jaumandreu, Jordi & Moral, Maria Jose, 2006. "Identifying behaviour in a multiproduct oligopoly: Incumbents reaction to tariffs dismantling," MPRA Paper 1248, University Library of Munich, Germany.

    More about this item

    Keywords

    Broadband; Structural Separation; Prices;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

    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:net:wpaper:0610. 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: . General contact details of provider: http://www.NETinst.org/ .

    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: Nicholas Economides (email available below). General contact details of provider: http://www.NETinst.org/ .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.