The Changing Nature Of The Telecommunications Industry: Impacts On Demand And Regulation
Mayo, John W
The telecommunications industry has recently experienced drastic changes. The aim of these essays is to examine how the changes in the industry have transformed consumers' demand for telecommunications services and the impact of these changes on universal service policies.In the first chapter, my co-authors and I explore the evolution of consumers' demand for telecommunications using a model that extends the traditional (node-to-node) demand structure. We empirically estimate a consumer choice model using household-level observations from 2003-2010. We find that households that are more affiliated with their domicile are more prone toward wireline services while more "on the go" households are more attracted to wireless telephony. The results indicate that subscription to wireline and wireless telephony are substitutes rather than complements. Finally, we find that the quality convergence in wireless and wireline services has contributed significantly to shifts in consumers' telephone portfolios.In the second chapter, I examine whether subsidies to low-income households promote the goal of Universal Service. In 2005, Lifeline - the federal program designed to promote universal telecommunications services to low-income households, was expanded to cover wireless as well as wireline services. In this paper I utilize a unique household-level data set to examine the impact of Lifeline as well as the impact of its extension to wireless service. The results indicate both the subsidy and its extension to prepaid wireless service have increased subscription rates among low-income households, however at high cost. The counterfactual experiment shows that only one out of eight households that receive the subsidy subscribes to telephone service because of the subsidy.Finally, the third chapter analyses the demand for international telephone calls using a simultaneous equations model. The analysis draws upon unique data collected for 24 countries over the 2010-2012 period. These data contain traffic from both landline and cellular phones routed through conventional Time Division Multiplexed (TDM) networks and emergent Voice over Internet Protocol (VoIP) technology. The results indicate that mobile prices are negatively correlated with the demand for international calls, while prices for calls via wireline networks and VoIP have no significant impact. The results show that proliferation of broadband has contributed to the growth of international telephone traffic.
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