The Relationship Between Mobile and Fixed Line Communications: A Survey

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Executive Summary

While a dramatic worldwide increase in mobile communication to above 4 billion users has occurred, wealthy countries in the last few years have experienced a significant decline in fixed network subscriptions. Such Fixed-to-Mobile Substitution (FMS) is at the center of this literature survey. Theoretical models explaining FMS are scarce and potentially support both substitution and complementarity between the fixed and mobile sector. Empirical explanations largely rest on the combination of positive cross elasticities of demand and reductions in mobile relative to fixed communications prices. Cost reductions of mobile networks also support FMS as do network effects and quality improvements of mobile services.

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