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Substitution and Complementarity between Fixed-line and Mobile Access

  • Lukasz Grzybowski

    ()

    (Telecom ParisTech, Department of Economics and Social Sciences, 46 rue Barrault, 75013 Paris, France)

  • Frank Verboven

    ()

    (University of Leuven and CEPR (London), Naamsestraat 69, 3000 Leuven, Belgium)

We use rich survey data on 133,825 households from 27 EU countries during 2005-2011 to analyze substitution between fixed-line and mobile telecommunications services. We estimate a discrete choice model where households may choose between having mobile or fixed-line voice access only, or using both technologies at the same time. We obtain the following main findings. First, fixed-line and mobile connections are on average perceived as substitutes. But there is substantial heterogeneity across households and EU regions, with stronger substitution in Central and Eastern European countries. Second, there is strong complementarity between fixed-line and mobile connections that are offered by the fixed-line incumbent operator. This gives the incumbent a possibility to leverage its position in the fixed-line market into the mobile market. Third, fixed broadband technologies such as DSL and cable generate strong complementarities between fixed and mobile access, while mobile broadband strengthens substitution (at a smaller scale). The emergence of fixed broadband has thus been an important additional source through which incumbents leverage their strong position in the fixed-line network.

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File URL: http://www.netinst.org/Grzybowski_Verboven_13-09.pdf
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Paper provided by NET Institute in its series Working Papers with number 13-09.

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Length: 37 pages
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:net:wpaper:1309
Contact details of provider: Web page: http://www.NETinst.org/

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  1. Ward, Michael R. & Woroch, Glenn A., 2010. "The effect of prices on fixed and mobile telephone penetration: Using price subsidies as natural experiments," Information Economics and Policy, Elsevier, vol. 22(1), pages 18-32, March.
  2. Grzybowski, Lukasz, 2014. "Fixed-to-mobile substitution in the European Union," Telecommunications Policy, Elsevier, vol. 38(7), pages 601-612.
  3. Srinuan, Pratompong & Srinuan, Chalita & Bohlin, Erik, 2012. "Fixed and mobile broadband substitution in Sweden," Telecommunications Policy, Elsevier, vol. 36(3), pages 237-251.
  4. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2.
  5. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
  6. Lukasz Grzybowski & Chiraz Karamti, 2007. "Competition in Mobile Telephony in France and Germany," Working Papers 07-24, NET Institute, revised Sep 2007.
  7. 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.
  8. Michael R. Ward & Glenn A. Woroch, 2005. "Fixed-Mobile Telephone Subscription Substitution in the U.S," Working Papers 0501, University of Texas at Arlington, Department of Economics.
  9. 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.
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