Review of Industrial Organization (2005) 26:325–347 © Springer 2005
Australian Residential Telecommunications
Consumption and Substitution Patterns
and GRANT COBLE-NEAL
School of Economics and Finance, Curtin University of Technology, GPO Box U1987,
Perth, WA 6845, Australia
State Development Strategies, Department of Industry and Resources Perth, WA 6005,
Abstract. Better telecommunications pricing decisions are able to be made when more
complete information concerning relationships among services is available. This study
analyses residential ﬁxed-line and mobile telephony, and Internet access and usage
demands in an encompassing framework. The discrete-continuous framework allows for
service interaction within and between service portfolios. Model estimation is based on
the examination of data collected from a country-wide survey of Australian households.
In particular, observed service portfolios (household consumption patterns at prevailing
access prices and estimated average service usage prices), income and demographic char-
acteristic data are collected. These data also allow the modelling to potentially identify
market segments based on income and other household characteristics.
Key words: service subscription and usage, substitution patterns, telecommunications pricing.
JEL Classiﬁcations: D12, L11, L69.
Competition, deregulation and new services, made available by the con-
vergence of computers, wireless, cable and the Internet with conventional
wire-line telephony, has identiﬁed modelling requirements not traditionally
addressed by telecommunications demand analyses (Taylor, 2002). In par-
ticular, as Taylor argues, while the interdependence of access and usage
remains fundamental – the treatment of access needs to be more compre-
hensive to include ﬁxed-line and mobile telephony, and the Internet within
an encompassing framework. This approach enables the identiﬁcation of
any substitution or complementary relations among services. Whether ser-
vices are complements or substitutes matters in the designing of revenue
Author for correspondence: Tel.: +64-8-9266-4258; E-mail: gary.madden@