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

Lukasz Grzybowski and Frank Verboven

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

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.

Date: 2014-06
New Economics Papers: this item is included in nep-com, nep-dcm, nep-eur, nep-ger and nep-ict
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Related works:
Journal Article: Substitution between fixed-line and mobile access: the role of complementarities (2016)
Working Paper: Substitution between Fixed-line and Mobile Access: the Role of Complementarities (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces14.12

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