Competition between fixed and mobile broadband access based on mobility and data volumes

The purpose of this article is to show that the assumption that fixed and mobile broadband markets are independent, on which current economic literature and broadband policies are based, needs to be revised and that explicit modelling of fixed and mobile interdependence is required. Empirical observations from markets and technology, which demonstrate the existence of a degree of fixed-mobile substitutability, lead us to propose a new modelling framework to analyse the interdependence of fixed and mobile broadband markets and address its impact on issues such as competition, prices and regulatory policies. Fixed and mobile broadband offers have asymmetrical characteristics to match consumers' demand functions, expressed in terms of willingness to pay for certain levels of mobility and data volumes. In this framework, a duopoly and then an oligopoly model are proposed to analyse the competition between fixed and mobile broadband access. Effects of fixed-mobile interdependence are modelled such as, for instance, how a fixed monopoly price may be naturally regulated by a competitive mobile market. The paper also examines how the new framework enables us to model the impact of future technological and commercial developments such as the deployment of LTE for mobile networks and FTTH for fixed networks.