Broadband prices in the European Union : competition and commercial strategies

This paper analyses the determinants of broadband Internet access prices in a group of 15 EU countries between 2008 and 2011. Using a rich panel dataset of broadband plans, we show the positive effect of downstream speed on prices, and report that cable and fibre-to-the-home technologies are available at lower prices per Mbps than x DSL technology. Operators’marketing strategies are also analysed as we show how much prices rise when the broadband service is offered in a bundle with voice telephony and/or television, and how much they fall when download volume caps are included. The most insightful results of this study are provided by a group of metrics that represent the situation of competition and entry patterns in the broadband market. We show that consumer segmentation positively affects prices. On the other hand, broadband prices are higher in countries where entrants make greater use of bitstream access and lower when they use more intensively direct access -local loop unbundling-. However, we do not find a significant effect of inter-platform competition on prices

Network Externalities and Critical Mass in the Mobile Telephone Network: a Panel Data Estimation

This paper develops a simple demand model with network externalities which allow us to identify the shape of the network externalities function in the mobile telephone market and to estimate the critical mass. If the mobile telephone network exhibits positive network externalities, we expect that the demand curve is not downward sloping everywhere but it has an increasing part, the critical mass of the installed base of subscribers. Once the critical mass is reached, the growth of the network is self-sustaining. We use a panel data of the 30 OEDC Countries from 1989 to 2006 for estimating the relationship between price of 3-minute cellular call and the installed base of subscribers; we find strong network externalities effects in mobile telephone market which drive the demand curve for this network good to be an inverted U function. Moreover, given that the concavity of the demand curve depends on the extent of network externalities, the idea is to identify some variables which could affect the intensity of network effects in the mobile telephone market, because the more concave the demand curve is, sooner the critical mass is reached for any price. This may have important implications for producers in terms of initial investment and marketing strategies which they have to do to attain the critical mass.Network Externalities, Mobile Telecommunication, Critical Mass

Estimation of network externalities and critical mass in the mobile telephone market: a panel data analysis of the OECD countries

Network Externalities, Mobile Telecommunication, Critical Mass

Essays on Economics of Network Industries: Mobile Telephony

This thesis addresses theoretical and empirical questions related to network economics. In particular, it analyze network effects and switching costs in the mobile telecommunications industry. The first chapter analyzes competition in a two-period differentiated-products duopoly in the presence of both switching costs and network effects. They are shown to have opposite implications on the demand side, specially in the first period. While the former reduces demand elasticities, the latter increases them. Increases in marginal network benefits imply lower prices in both periods while the effects of switching costs are ambiguous. However, when network effects are strong, and switching costs are moderate, prices in both periods may be lower than those in a market without network effects and switching costs. This property may be exploited to increase aggregate consumer surplus by instituting a switching tax. The second essay analyzes demand for mobile telecommunications services in Germany in the period from January 1998 to June 2003. During this time, subscriber base grew exponentially by about 700% while prices declined only moderately by about 41%. The estimation results indicate that network effects played a significant role in the diffusion of mobile services in Germany. The third chapter employs multinominal and mixed logit on panel data of British households between the years 1999-2001 to estimate the magnitude of switching costs in mobile telephony. According to the estimation results, consumers of mobile services in the UK face significant switching costs which vary in the magnitude across network operators. The choices of network operators are also explained by observed and unobserved heterogeneity in consumers' tastes. The final essay analyzes the impact of regulation on the development and competitiveness of mobile telecommunications industry across the European Union. Using cross-country panel data, a reduced-form and a structural model are estimated. The estimation results indicate that prices are significantly influenced by the regulatory policy

Bundling telecommunications services : competitive strategies for converging markets

With the advent of digital convergence, incumbent telephone and cable companies have begun to offer their services, such as voice telephony, Internet and TV in so-called triple play packages. While carefully recognizing the technological, legal and economic framework of the fixed-line telecommunications industry, this book investigates whether bundling is indeed a profitable pricing strategy for the firms and if it can possibly facilitate the leverage of market power into neighboring markets

Essays on Economics of Network Industries: Mobile Telephony

This thesis addresses theoretical and empirical questions related to network economics. In particular, it analyze network effects and switching costs in the mobile telecommunications industry. The first chapter analyzes competition in a two-period differentiated-products duopoly in the presence of both switching costs and network effects. They are shown to have opposite implications on the demand side, specially in the first period. While the former reduces demand elasticities, the latter increases them. Increases in marginal network benefits imply lower prices in both periods while the effects of switching costs are ambiguous. However, when network effects are strong, and switching costs are moderate, prices in both periods may be lower than those in a market without network effects and switching costs. This property may be exploited to increase aggregate consumer surplus by instituting a switching tax. The second essay analyzes demand for mobile telecommunications services in Germany in the period from January 1998 to June 2003. During this time, subscriber base grew exponentially by about 700% while prices declined only moderately by about 41%. The estimation results indicate that network effects played a significant role in the diffusion of mobile services in Germany. The third chapter employs multinominal and mixed logit on panel data of British households between the years 1999-2001 to estimate the magnitude of switching costs in mobile telephony. According to the estimation results, consumers of mobile services in the UK face significant switching costs which vary in the magnitude across network operators. The choices of network operators are also explained by observed and unobserved heterogeneity in consumers' tastes. The final essay analyzes the impact of regulation on the development and competitiveness of mobile telecommunications industry across the European Union. Using cross-country panel data, a reduced-form and a structural model are estimated. The estimation results indicate that prices are significantly influenced by the regulatory policy.network economics; mobile telephony; network effects; switching costs; regulatory policy