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Estimation of switching costs and network effects in mobile telecommunications in Poland

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  • Czajkowski, Mikołaj
  • Sobolewski, Maciej

Abstract

In this paper we utilize discrete choice experiment method to identify and measure switching costs and network effects in mobile telephony in Poland. Based on hypothetical choices consumers make we construct a conditional random parameters multinomial logit model to analyze their preferences. In our choice design we explicitly account for status quo inertia, number portability, operator brand, network distribution of most frequently called parties and price of on-net and off-net calls. Stated preference approach allows us to calculate marginal rates of substitution and hence implicit prices of the non-price attributes used to describe choices and switching behavior. Results of our study indicate that although choices of mobile operators are largely driven by price of calls, switching costs and network effects have and strong impact on utility of subscribers. In particular users assign positive value to their mobile phone number and the size of family and friends group in the same network. The monetary value of phone number is significantly higher among individual entrepreneurs then residential subscribers. In our model switching behavior is not discouraged by brand loyalty which turned out to be insignificant. Instead subscribers follow status quo inertia which reflects uncertainty associated with new operator. Therefore we conclude that despite introduction of mobile number portability, switching costs continue to be an important issue in telecommunications markets. On recommendations level, we argue that regulatory and competition policies should continue to reduce uncertainty associated with changing operator by ensuring service and platform compatibility and reducing tariff complexity. In light of our results we recommend tariffs to be non-discriminatory so that operators are unable to utilize network effects in a way which discourages switching behavior.

Suggested Citation

  • Czajkowski, Mikołaj & Sobolewski, Maciej, 2013. "Estimation of switching costs and network effects in mobile telecommunications in Poland," 24th European Regional ITS Conference, Florence 2013 88515, International Telecommunications Society (ITS).
  • Handle: RePEc:zbw:itse13:88515
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    Cited by:

    1. Uner, M.Mithat & Guven, Faruk & Cavusgil, S.Tamer, 2020. "Churn and loyalty behavior of Turkish digital natives: Empirical insights and managerial implications," Telecommunications Policy, Elsevier, vol. 44(4).
    2. Florez Ramos, Esmeralda & Blind, Knut, 2020. "Data portability effects on data-driven innovation of online platforms: Analyzing Spotify," Telecommunications Policy, Elsevier, vol. 44(9).
    3. Gerpott, Torsten J. & Meinert, Phil, 2018. "Termination notice of mobile network operator customers after a tariff switch: An empirical study of postpaid subscribers in Germany," Telecommunications Policy, Elsevier, vol. 42(3), pages 212-226.
    4. Pacharasut Sujarittanonta, 2017. "Evaluating mobile number portability policy in the Thai mobile telecommunications market," Journal of Regulatory Economics, Springer, vol. 51(2), pages 220-233, April.
    5. Sobolewski, Maciej & Czajkowski, Mikołaj, 2018. "Receiver benefits and strategic use of call externalities in mobile telephony markets," Information Economics and Policy, Elsevier, vol. 44(C), pages 16-27.
    6. Capponi, Giovanna & Corrocher, Nicoletta & Zirulia, Lorenzo, 2021. "Personalized pricing for customer retention: Theory and evidence from mobile communication," Telecommunications Policy, Elsevier, vol. 45(1).
    7. Sobolewski, Maciej & Kopczewski, Tomasz, 2017. "Estimating demand for fixed-line telecommunication bundles," Telecommunications Policy, Elsevier, vol. 41(4), pages 227-241.
    8. Paulo Chahuara, 2018. "Preferencias y Valorizacion por Atributos del Servicio de Internet Fijo en el Peru: un primer acercamiento via experimento de eleccion discreta," Documentos de Trabajo 39, OSIPTEL.
    9. García-Mariñoso, Begoña & Suárez, David, 2019. "Switching mobile operators: Evidence about consumers’ behavior from a longitudinal survey," Telecommunications Policy, Elsevier, vol. 43(5), pages 426-433.
    10. Yong Joon Hyoung & Arum Park & Kyoung Jun Lee, 2020. "Why Are the Largest Social Networking Services Sometimes Unable to Sustain Themselves?," Sustainability, MDPI, Open Access Journal, vol. 12(2), pages 1-23, January.
    11. Rebeca Escobar Briones, 2018. "Impacto de las modificaciones en el proceso de portabilidad numérica sobre los servicios de telecomunicación móvil/The impact on telecommunications services of modifications to mobile number portabili," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 33(1), pages 3-28.

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    More about this item

    Keywords

    Switching costs; network effects; mobile telecommunications; mobile number portability; brand valuation; stated preference methods; non-market valuation methods; choice experiment; multinomial conditional logit model; random parameters model;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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