Skip to main content
SpringerLink
Log in

Fixed-to-mobile call substitution and telephony market definition in Korea

  • Original Article
  • Published:
Journal of Regulatory Economics Aims and scope Submit manuscript

Abstract

An appropriate market definition is critical in most antitrust cases. In practice, antitrust authorities define economic markets in a deterministic manner with little concern about the risk involved in defining markets incorrectly. In contrast, this article proposes a probabilistic market definition method by which antitrust authorities can establish a statistical confidence level for their intended market-definition judgments. As an application, we examine the likelihood that the fixed-line and mobile telephony services in Korea can compete in the same economic market. Combining critical loss analysis with a hierarchical Bayes model for stated preference data, we find some evidence for the separation of the fixed-line and mobile telephony markets in present-day Korea. After discussing certain possible regulation biases for market definition, we predict that the two markets will converge in the near future as the mobile price premium continues to decrease.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Allenby G. M., Ginter J. L. (1995) Using extremes to design products and segment markets. Journal of Marketing Research 32(4): 392–403

    Article  Google Scholar 

  • Allenby G. M., Rossi P. E. (1999) Marketing models of consumer heterogeneity. Journal of Econometrics 89(1–2): 57–78

    Google Scholar 

  • Ansari A., Jedidi K., Jagpal S. (2000) A hierarchical Bayesian approach for treating heterogeneity in structural equation models. Marketing Science 19(4): 328–347

    Article  Google Scholar 

  • Banerjee, A., & Dippon, C. M. (2005). Survey-based discrete choice techniques. Presented at NERA Business Symposium 2005. http://www.nera.com/image/Banerjee_Dippon_Perth_2005.pdf. Accessed 11 Feb 2009.

  • Bank of Korea (2009). Economic Statistics System.http://ecos.bok.or.kr/EIndex_en.js. Accessed 15 November, 2009

  • Beaudry P. (2010) Wireline deregulation: The Canadian experience. Telecommunications Policy 34(10): 606–615

    Article  Google Scholar 

  • Blumberg, S. J., & Luke, J. V. (2009). Wireless substitution: Early release of estimates from the National Health Interview Survey, July–December 2008. http://www.cdc.gov/nchs/data/nhis/earlyrelease/wireless200905.pdf. Accessed 20 July 2010.

  • Briglauer, W., Schwarz, A., & Zulehner, C. (2010). Is fixed-mobile substitution strong enough to de-regulate fixed voice telephony?: Evidence from the Austrian markets. Mimeo. http://homepage.univie.ac.at/Christine.Zulehner/Fixed%20mobile%20substitution_BSZ.pdf. Accessed 20 July 2010.

  • Cardona M., Schwarz A., Yurtoglu B., Zulehner C. (2009) Demand estimation and market definition for broadband internet services. Journal of Regulatory Economics 35(1): 70–95

    Article  Google Scholar 

  • Carroll J. D., Green P. E. (1995) Psychometric methods in marketing research: Part I, conjoint analysis. Journal of Marketing Research 32(4): 385–391

    Article  Google Scholar 

  • Carlton D. W. (2007) Market definition: Use and abuse. Competition Policy International 3: 3–27

    Google Scholar 

  • Caves, K. W. (2010). Quantifying price-driven wireless substitution in telephony. http://ssrn.com/abstract=1670433. Accessed 1 Aug 2010.

  • CPUC. (2006). Order instituting rulemaking on the commission’s own motion to assess and revise the regulation of telecommunications utilities. Decision 06-08-030, 24 Aug 2006.

  • Federal Communications Commission. (2007). Memorandum opinion & order in WC Docket No. 06-74 (In the matter of AT&T Inc. and BellSouth Corporation application for transfer of control), FCC 06-189, released 26 Mar 2007.

  • Gartner (2006). User survey analysis: Fixed-to-mobile substitution and calling patterns, United States. 4 Sep 2006. http://www.gartner.com/DisplayDocument?doc_cd=14166. Accessed 3 June, 2011.

  • Gelman A., Rubin D. B. (1992) Inference from iterative simulation using multiple sequences. Statistical Science 7(4): 457–472

    Article  Google Scholar 

  • Gilbride T. J., Allenby G. M. (2004) A choice model with conjunctive, disjunctive, and compensatory screening rules. Marketing Science 23(3): 391–406

    Article  Google Scholar 

  • Greene P. E., Krieger A. M. (2002) What’s right with conjoint analysis?. Marketing Research 14(1): 24–27

    Google Scholar 

  • Hildebrand D. (2006) Using conjoint analysis for market definition: Application of modern market research tools to implement the hypothetical monopoly test. World Competition 29(2): 315–335

    Google Scholar 

  • Jedidi K., Zhang Z. J. (2002) Augmenting conjoint analysis to estimate consumer reservation price. Management Science 48(10): 1350–1368

    Article  Google Scholar 

  • Mao C., Tsai H., Chen C. (2008) FMS patterns: Penetration vs. traffic substitution in different groups of countries. Technological Forecasting and Social Change 75: 356–384

    Article  Google Scholar 

  • McCulloch R. E., Polson N. G., Rossi P. E. (2000) A Bayesian analysis of the multinomial probit model with fully identified parameters. Journal of Econometrics 99(1): 173–193

    Article  Google Scholar 

  • Rodini M., Ward M. R., Woroch G. A. (2003) Going mobile: Substitutability between fixed and mobile access. Telecommunications Policy 27(5): 457–476

    Article  Google Scholar 

  • Rossi P. E., Allenby G., McCulloch R. (2005) Bayesian statistics and marketing. Wiley, New York

    Book  Google Scholar 

  • Scheffman, D. T., & Simons, J. I. (2003). The state of critical loss analysis. Antitrust source, Nov 2003. http://www.abanet.org/antitrust/at-source/03/11/scheffman.pd. Accessed 20 July 2010.

  • Sung N., Lee Y. (2002) Substitution between mobile and fixed telephones in Korea. Review of Industrial Organization 20: 367–374

    Article  Google Scholar 

  • US Department of Justice & Federal Trade Commission. (1992). Horizontal merger guidelines, issued on 2 April 1992. http://www.usdoj.gov/atr/public/guidelines/horiz_book/hmg1.htm. Accessed 3 June 2011.

  • Valletti T., Houpis G. (2005) Mobile termination: What is the “right” charge?. Journal of Regulatory Economics 28(3): 235–258

    Article  Google Scholar 

  • Vogelsang I. (2010) The relationship between mobile and fixed-line communications: A survey. Information Economics and Policy 22(1): 4–17

    Article  Google Scholar 

  • Ward, M., & Woroch, G. A. (2004). Usage substitution between fixed and mobile telephony in the US. CRTP Working Paper.

  • Weisman D. L. (2006) When can regulation defer to competition for constraining market power? Complements and critical elasticities. Journal of Competition Law & Economics 2(1): 101–112

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. School of Business Administration, Ajou University, Suwon, Korea

    Hongjai Rhee

  2. School of Economics, Chung-Ang University, Anseong, Korea

    Minsoo Park

Authors
  1. Hongjai Rhee
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Minsoo Park
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Minsoo Park.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Rhee, H., Park, M. Fixed-to-mobile call substitution and telephony market definition in Korea. J Regul Econ 40, 198–218 (2011). https://doi.org/10.1007/s11149-011-9156-1

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11149-011-9156-1

Keywords

JEL Classification

Search

Navigation