Substitution and Complementarity between Fixed-Line and Mobile Access

37 Pages Posted: 7 Oct 2013  

Lukasz Grzybowski

Telecom ParisTech

Frank Verboven

KU Leuven - Faculty of Business and Economics (FEB)

Date Written: September 30, 2013

Abstract

We use rich survey data on 133,825 households from 27 EU countries during 2005-2011 to analyze substitution between fixed-line and mobile telecommunications services. We estimate a discrete choice model where households may choose between having mobile or fixed-line voice access only, or using both technologies at the same time. We obtain the following main findings. First, fixed-line and mobile connections are on average perceived as substitutes. But there is substantial heterogeneity across households and EU regions, with stronger substitution in Central and Eastern European countries. Second, there is strong complementarity between fixed-line and mobile connections that are offered by the fixed-line incumbent operator. This gives the incumbent a possibility to leverage its position in the fixed-line market into the mobile market. Third, fixed broadband technologies such as DSL and cable generate strong complementarities between fixed and mobile access, while mobile broadband strengthens substitution (at a smaller scale). The emergence of fixed broadband has thus been an important additional source through which incumbents leverage their strong position in the fixed-line network.

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

JEL Classification: L13, L43, L96

Suggested Citation

Grzybowski, Lukasz and Verboven, Frank, Substitution and Complementarity between Fixed-Line and Mobile Access (September 30, 2013). NET Institute Working Paper No. 13-09. Available at SSRN: https://ssrn.com/abstract=2335696 or http://dx.doi.org/10.2139/ssrn.2335696

Lukasz Grzybowski (Contact Author)

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
France

Frank Verboven

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

Naamsestraat 69
Leuven, B-3000
Belgium

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