Are Mobile Networks Always a Substitute for Fixed Networks?

Fixed to mobile substitution is a trend that is reshaping the telecommunications industry. Telkom's response to this trend, for example, has been to build a mobile network to recapture revenues lost to mobile operators. The question is, to what extent are fixed and mobile networks substitutes, and are there groups of customers for whom fixed and mobile are not substitutes? There is evidence that suggests that, for many customers using voice services, fixed and mobile services are to some degree substitutes. However, for small, medium and large enterprise customers, and for high-usage residential customers, there is evidence that mobile broadband networks are not a substitute for fixed broadband networks. There is a trade-off between speed and throughput in mobile networks that does not exist to the same degree in fixed networks. This is due to the limited capacity and shared nature of the use of radio frequency spectrum for broadband. Fixed incumbent operators worldwide are able to distinguish between business and residential customers, and very often charge significantly higher prices to business and high-end residential customers. They are able to do this because the telecommunications operators are able to identify business customers separately from consumers, and are able to prevent arbitrage: a copper line running to a business premises cannot be substituted for a copper line running to a house nearby. Operators are also able to identify high end consumers through self-selection by bundling, for example, video content with a DSL subscription. The implications of this are that, rather than adopting a more relaxed approach to the regulation of fixed operators in the face of competition from mobile operators, fixed operators should be closely regulated in order to protect significant groups of customers