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

Lukasz Grzybowski and Frank Verboven

Journal of Regulatory Economics, 2016, vol. 49, issue 2, 113-151

Abstract: Abstract We study substitution from fixed-line to mobile voice access, and the role of various complementarities that may slow down this process. We use survey data of 160,363 households from 27 EU countries during 2005–2011. We estimate a discrete choice model where households may choose one or both voice 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 14.1 % higher at the end of 2011. 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 the fixed-line and mobile connections offered by the fixed-line incumbent operator. This gives the incumbent a possibility to protect its position in the fixed-line market, raising market share by 2.7 %, and to leverage it into the mobile market, raising market share by 5.4 % points. Third, the decline in fixed telephony has also been slowed down because of the complementarity with broadband internet: the introduction of DSL avoided an additional decline in fixed-line penetration of 8.7 % points at the end of 2011. The emergence of fixed broadband has thus been the main source through which incumbents maintain their strong position in the fixed-line network.

Keywords: Fixed-to-mobile substitution; Incumbency advantage; Broadband access (search for similar items in EconPapers)
JEL-codes: L13 L43 L96 (search for similar items in EconPapers)
Date: 2016
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Working Paper: Substitution between Fixed-line and Mobile Access: the Role of Complementarities (2014) Downloads
Working Paper: Substitution between fixed-line and mobile access: the role of complementarities (2014) Downloads
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DOI: 10.1007/s11149-015-9290-2

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