Are mobile and fixed line telephone services substitutes or complements? Evidence from transition economies

This paper addresses the issue of whether mobile telephone and fixed line telephone services are substitutes or complements in transition economies. Some studies have found that they are complements in this region, which contrasts with findings for other regions where mobile telephones and fixed line services are found to be substitutes. This study finds evidence in the support of the conclusion that complementarity and substitutability are associated with the stage of the market's development regardless of geographic region. Apparently results of previous research are predetermined by the data sample selection. The study confirms that factors positively influencing mobile telephone penetration rates are national income levels and the intensity of competition in telecommunications markets. The results suggest that by encouraging competition in mobile telephony governments can accelerate mobile phone penetration rates to the benefit of consumers. Additionally, the development of mobile telephony can put competitive pressure on incumbent fixed lines operators.