Substitution between Fixed-Line and Mobile Access: The Role of Complementarities

44 Pages Posted: 25 Sep 2014

See all articles by Lukasz Grzybowski

Lukasz Grzybowski

Télécom Paris

Frank Verboven

KU Leuven - Faculty of Business and Economics (FEB)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2014

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.

Keywords: broadband access, fixed-to-mobile substitution, incumbency advantage

JEL Classification: L13, L43, L96

Suggested Citation

Grzybowski, Lukasz and Verboven, Frank, Substitution between Fixed-Line and Mobile Access: The Role of Complementarities (June 2014). CEPR Discussion Paper No. DP10045, Available at SSRN: https://ssrn.com/abstract=2501517

Lukasz Grzybowski (Contact Author)

Télécom Paris ( email )

19 Place Marguerite Perey
Palaiseau, 91120
France

Frank Verboven

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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