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Saturday, September 26 • 2:00pm - 2:32pm
The Impact of Asymmetric Regulation on Product Bundling: The Case of Fixed Broadband and Mobile Communications in Japan

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Economic theory provides guidelines for efficiency increasing bundling and anti-competitive bundling. The effect of product bundling strongly depends demand function for goods bundled. To assess the effect of product bundling is absolutely empirical issue. Regarding to the concern of entry deterrence, Japan Ministry of Internal Affairs and Communications (MIC) has prohibited the telecommunication incumbent NTT grope to bundle fixed communication services and mobile communication services. In 2012, a competitor introduced the bundle discount for fixed broadband and mobile communications. A competitor's market share remarkably increased after introducing bundling. In 2014, NTT grope announced to begin a wholesaling of their FTTH services to any firms that include NTT's mobile operator. MIC approved NTT to use this wholesale that enable them to set bundle discount pricing in 2015. To assess whether this regulation change works for consumer, we develop the structural demand model where consumer's willingness to pay for goods are correlated. Adopting mixed logit model with error correlation allow us to estimate the individual specific demand correlation for goods. We also estimates the technological complementarities/substitutabilities between goods that provided by same firm grope. We estimate the model by combining two internet survey and one mail survey. The first internet survey consist of 2010 individual fixed broadband internet user in Japan. The second internet survey consist of 500 individual who does not use the fixed broadband but use mobile communications. Those two internet surveys are designed for the competition review in the Telecommunications Business Field. We obtain the choice of fixed broadband and mobile communication, monthly expenditure to those services and socio demographic characteristics. The last survey is the Communications Usage Trend Survey (CUTS) 2012 that been conducted in accordance with the Statistics Act for official statistics by mail survey. This survey consists 20,418 households and 54,099 individuals. We draw 1230 respondents from this survey to assess whether individual who does not use fixed broadband or mobile communication subscribe the fixed-broadband or the mobile communications when they face counterfactual state. Finally, we obtain 3740 observation that includes 2,000 broadband user, 2,298 mobile phone user and 1239 non user that approximately proportional to individual choice obtained by CUTS 2012. Estimation result shows that cross price elasticity between fixed broadband is positive. Similarly, cross price elasticity between mobile communications is positive, too. However, cross price elasticity of NTT's fixed broadband and mobile communication is negative. In contrast with NTT, those of KDDI and SoftBank are positive. It also shows bundle-discount tend to attract the consumer who does not use fixed broadband or mobile communications. It imply that NTT's bundle discount increases consumer surplus by drawing customer from outside of the markets and less likely harms the market competition. To complete the impact of asymmetric regulation on product bundling, we are calculating subgame perfect equilibriums of two-stage game with/without asymmetric regulation. Results are coming soon.


Deborah Minehart

Department of Justice


Toshifumi Kuroda

Full-time Lecturer, Tokyo Keizai University


Saturday September 26, 2015 2:00pm - 2:32pm
GMUSL - Room 221

Attendees (13)