Tuesday, November 25, 2014

Substitution between fixed-line and mobile access: the role of complementarities

Lukasz Grzybowski, Telecom ParisTech & Frank Verboven, University of Leuven discuss Substitution between fixed-line and mobile access: the role of complementarities.

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.

https://lawprofessors.typepad.com/antitrustprof_blog/2014/11/substitution-between-fixed-line-and-mobile-access-the-role-of-complementarities-.html

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