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Substitution or Complementarity between

Fixed and Mobile Broadband services?

Youngsoo Kim, Gwangjae Jung, and Robert Kauffman

Singapore Management University

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Research Background

<Source: Morgan Stanely

Research, 2010>

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Motivation

The relationship is not clearly identified Substitution (Garbacz and Thomson 2005; Grajek and Kretshmer

2009; Narayana 2008; Rodini et. al. 2003)

Complementarity (Albon 2006; Nielsen and Fjuk 2010)

Lack of individual level of analysis Aggregate penetration rate of broadband internet

Cross-price elasticity

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Motivation

Environmental change in internet usage Emergence of smart devices / mobile internet

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Motivation and Research Questions

Cross-effects between mobile and fixed broadband

services at an individual level of subscription

The effect of smartphone subscription to the

change in mobile/fixed broadband services

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Research Methodology

OLS to identify the cross effects between MBB and FBB

Use broadband bandwidth to translate the subscription

changes

Two different types of signals to observe bandwidth

changes

State-dependent preference (Savage 1954) ∆FBB = f(MBB, DataCap, Smartphones, Age, Gender, Dwelling_Type, Region, Time)

∆MBB = f(FBB, Smartphones, Age, Gender, Dwelling_Type, Region, Time)

Action-dependent preference (Karni 2006) ∆FBB f(∆MBB, ∆DataCap, Smartphones, Age, Gender, Dwelling_Type, Region,

Time)

∆MBB f(∆FBB, Smartphones, Age, Gender, Dwelling_Type, Region, Time)

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Data Description

Singaporean retail telecom company

Period: Jun/01/2007 – May/31/2012 (5 years)

125,080 subscription events in fixed broadband services

(include new subscription, switching, and termination)

40,964 cases in mobile broadband services

11 fixed broadband services (from 0 to 1Gbps)

8 mobile broadband services (from 0 to 42Mbps)

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State-dependent preference: FBB

Customers with

higher MBB tend

to switch higher

FBB

(except for MBB

lower than

1.2mbps)

Given state of MBB FBB changes

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State-dependent preference: MBB

Customers with

higher FBB tend

to switch higher

MBB

Given state of FBB MBB changes

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Action-dependent preference: FBB

Complementary effect

in overall

Positive change in MBB

complementarity

Negative change in MBB

substitution

ex-ante change in MBB ex-post change in FBB

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Action-dependent preference: MBB

No significant effect

in overall

Positive change in FBB

complementarity

Negative change in FBB

substitution

ex-ante change in FBB ex-post change in MBB

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Other Results

Smartphone Effects The use of smartphone services positively affects the change in both

FBB and MBB

Time Effects Increasing trend of switching to higher bandwidth (either MBB or

FBB) after smartphone services were introduced

Demographic Effects Male subscribers want higher bandwidth than females

Subscribers aged between 30 and 50 want more bandwidth than

others

Confirmed wealth effects (region/type of residence)

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Discussion

Implication Complementarity between mobile and fixed broadband services in

perspective of consumers’ service subscription

Different promotion strategy based on the types of signals

Observing the change in broadband services gives more

diversification of strategy than observing the current state of

services

Further research Integrated framework to identify the relationship among data-related

services including voice calls, SMS, and data in mobile phone

services

Relationship among data consumptions between services