Market definition for broadband internet in Slovakia – Are fixed and mobile technologies in the same market?

Lukasz Grzybowski, Rainer Nitsche, Frank Verboven and Lars Wiethaus

Information Economics and Policy, 2014, vol. 28, issue C, 39-56

Abstract: This paper uses a rich survey of 6446 households in Slovakia to estimate price elasticities of demand for Internet access, and draw implications for market definition. We estimate a mixed logit model, in which households choose between different broadband technologies: DSL, cable modem, fibre, WiFi and mobile. We find that a number of household characteristics influence the technology choices, and there is also significant unobserved heterogeneity. Demand for Internet access is highly price sensitive. The price elasticity of demand for DSL is −3.02, which falls in the middle of the range of elasticities for the other technologies. Furthermore, the price elasticity of demand at the level of all fixed broadband technologies (DSL+cable modem+fibre+WiFi) is equal to −1.98. For a reasonable range of profit margins, this estimate implies that mobile broadband should be included in the relevant antitrust market of fixed broadband. Our findings have implications for competition policy in Central and Eastern European countries where due to poor copper networks mobile broadband is an important alternative to fixed broadband.

Keywords: Broadband; Market definition; Multinomial logit; Mixed logit (search for similar items in EconPapers)
JEL-codes: L13 L43 L93 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:28:y:2014:i:c:p:39-56

DOI: 10.1016/j.infoecopol.2014.06.002

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