“Usage Substitution between Mobile Telephone and Fixed line in the U.S.” 1 We are gratefu.pdfVIP

“Usage Substitution between Mobile Telephone and Fixed line in the U.S.” Michael R. Ward, University of Texas at Arlington Glenn A. Woroch,1 University of California at Berkeley May 2004 ABSTRACT: We empirically estimate the substitutability of fixed and mobile services for telecommunications access using a large, U.S. household survey conducted over the period 1999-2001. We find significant positive cross-price elasticities between mobile and wireline usage. Because mobile usage prices fell dramatically over this period, we estimate that wireline usage may have been about 50% higher had mobile prices not fallen. KEYWORDS: Telecommunications, Mobile, Usage, Demand, Substitution CORRESPONDING AUTHOR: Michael R. Ward Department of Economics University of Texas at Arlington 330 Business Building Box 19479 - UTA Arlington, TX 76013 email: mikeward@ 1 We are grateful to TNS Telecoms for generously sharing the ReQuest and Bill Harvesting data and providing technical assistance. I. INTRODUCTION This paper documents the changing patterns of usage of mobile telephones in the US from 1999 through 2001. While the rapid pace of consumer adoption of mobile telephones is often noted when discussing the integration of this technology into everyday life, mere counts of subscribers tend to understate the degree to which wireless communications has been incorporated into consumers’ lifestyles. Due to improvements in battery life, coverage, handset size and functionality, consumers are increasingly relying on mobile phones to stay in contact with their family, friends, and co-workers. We document these trends using data from household surveys and consumer bills from TNS Telec