Masato Noguchi nogutiicr'co'jp

1
Fixed access v.s. wireless accessSubstitution
between services and its implications for telecom
policy

• Masato Noguchi (noguti_at_icr.co.jp)
• InfoCom Research,inc.
• Yuichi Takashima (takasima_at_iwate-pu.ac.jp)
• Iwate Prefectural University

2
Introduction from fixed access to wireless

• The rapid growth of mobile markets in Japan.(in
  March 2000, wireless access lines exceeded fixed
  access)
• Fixed analogue access lines have been decreasing
  since 1997.
• Access charge and the definition of the dominant
  carrier
• ISP market (internet access from mobile terminals)

3
Hypothesis

• Each market share in equilibrium is determined by
  the relative price gap between the fixed and
  wireless access.
• A new service completely substitutes the old.(ex.
  From monochrome TV to color TV)

Which is adequate ?
4
Research plan

• International comparison (US and Japan)
• market share and price of fixed and wireless
  access
• Empirical study about Japanese markets
• Making a positive model (understanding
  inter-modal competition)
• Estimation of the models (POTS, ISDN, Cellular
  phone, PHS)

Conclusion
5
Japan Decline of fixed access demand
Cellular phone
POTS(R)
PHS
POTS(B)
Paging
Wireless access
Fixed access
ISDN
6
United States both markets are growing
Cellular phone
Paging
POTS(R)
POTS(B)
Wireless access
Fixed access
7
Comparative study price
Price Gap Survey on Telecommunications Services
between Japan and Abroad in FY 1998 MPT
8
Results from the comparative study

• Japan
• greatly decreasing price of cellular telephone
  (after liberalization of price regulation)
• expensive installation charge for POTS
• US
• air time charge for incoming calls of cellular
  phone
• relatively low price of POTS

Hypothesis 1 seems to hold ?
9
A Positive Model
Accumulated amount of subscribers
Net growth of subscribers
Other services
constant
price
income
Saturation level (Potential market size)
10
Price and the diffusion process
Demand Curve for i
Willingness to pay
Old service
New service
quality
Yes?
New service takes all
11
Substitution process
Subscribers
Outflow from old to new
Beginning of new service
Japan
United States
The final phase
Time
Old service in the single market
Decrease of old service
12
Estimated fixed access demand
Net growth
POTS(R)
POTS(B)
Substitute with ISDN and PHS
Substitute with Cellular (d)
13
Estimated wireless access demand
Net growth
Analogue Cellular
Digital Cellular
POTS (b), ISDN, Cellular (d)
Substitute with PHS
14
Results from the empirical study
a1
a2
b0
c1
c2
d0
POTS (r)
a1
-
?

-
?

-
-
POTS (b)
a2




-
-
?
?
ISDN
b0

-
?
?
?
?
Cellular (a) to POTS (b)
Cellular (a)
c1

?
-
-
POTS(b) to Cellular (d)
Cellular (d)
c2
-
?
PHS
d0
The competitive condition in Japanese market
15
Conclusions

• The diffusion process of services under
  competition
• (comparative study) the hypothesis 1 is hopeful.
• (positive model) the both hypothesis may not be
  contradict with each other.
• Policy implications
• obvious outflow from POTS (b) to cellular (d)
• review of present access charge scheme is needed