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Fixed-Mobile Substitution and Termination Rates

Author

Listed:
  • Steffen Hoernig
  • Marc Bourreau
  • Carlo Cambini

Abstract

This paper studies the effect of termination rates on substitution between fixed and mobile calls and access, in a model where heterogeneous consumers can subscribe to one or both types of offers. Simulations show that each (fixed or mobile) termination rate has a positive effect on the take-up of the corresponding service, via the waterbed effect, and lowers subscriptions to the other service, via a cost effect. The prevailing asymmetric regulation, with very low fixed and higher mobile termination rates, corresponds to the social optimum. However, the interests of the mobile operators and of the different customer groups do not coincide. JEL codes: L51, L92

Suggested Citation

  • Steffen Hoernig & Marc Bourreau & Carlo Cambini, 2014. "Fixed-Mobile Substitution and Termination Rates," FEUNL Working Paper Series wp588, Universidade Nova de Lisboa, Faculdade de Economia.
  • Handle: RePEc:unl:unlfep:wp588
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    File URL: http://fesrvsd.fe.unl.pt/WPFEUNL/WP2014/Wp588.pdf
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    References listed on IDEAS

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    1. Barth, Anne-Kathrin & Heimeshoff, Ulrich, 2011. "Does the growth of mobile markets cause the demise of fixed networks? Evidence from the European Union," 22nd European Regional ITS Conference, Budapest 2011: Innovative ICT Applications - Emerging Regulatory, Economic and Policy Issues 52144, International Telecommunications Society (ITS).
    2. Barth, Anne-Kathrin & Heimeshoff, Ulrich, 2012. "How large is the magnitude of fixed-mobile call substitution? Empirical evidence from 16 European countries," DICE Discussion Papers 49, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    3. Grzybowski, Lukasz, 2014. "Fixed-to-mobile substitution in the European Union," Telecommunications Policy, Elsevier, vol. 38(7), pages 601-612.
    4. Paul Bijl & Martin Peitz, 2009. "Access regulation and the adoption of VoIP," Journal of Regulatory Economics, Springer, vol. 35(2), pages 111-134, April.
    5. Ward, Michael R. & Zheng, Shilin, 2012. "Mobile and fixed substitution for telephone service in China," Telecommunications Policy, Elsevier, vol. 36(4), pages 301-310.
    6. Tommaso Valletti & George Houpis, 2005. "Mobile Termination: What is the “Right” Charge?," Journal of Regulatory Economics, Springer, vol. 28(3), pages 235-258, November.
    7. Wright, Julian, 2002. "Access Pricing under Competition: An Application to Cellular Networks," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 289-315, September.
    8. Wolfgang Briglauer & Anton Schwarz & Christine Zulehner, 2011. "Is fixed-mobile substitution strong enough to de-regulate fixed voice telephony? Evidence from the Austrian markets," Journal of Regulatory Economics, Springer, vol. 39(1), pages 50-67, February.
    9. Lukasz Grzybowski & Frank Verboven, 2013. "Substitution and Complementarity between Fixed-line and Mobile Access," Working Papers 13-09, NET Institute.
    10. Tommaso Valletti, 2003. "Is Mobile Telephony a Natural Oligopoly?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(1), pages 47-65, February.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. 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.

    More about this item

    Keywords

    Network competition; Fixed-mobile substitution; termination rates;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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