An Empirical Analysis of Cellular Voice and Data Services

Cellular telephony and associated data services has been a major social phenomena for well over a decade now. It has changed the way – in some countries more than others – in which people communicate. In many countries in Northern Europe and Asia, its penetration rates are very high and in others less so but in all cases it has engendered change at multiple levels – socially as noted and in terms of market structure and competition with the established Incumbent Local Exchange and Inter Exchange service providers. However, there has been little work published in the academic literature on user consumption of cellular voice and data services. This has been due to the unavailability of longitudinal data at the individual user level on their consumption of voice and data services. We have such data from a large cellular service provider in Asia. Demand for voice and data services is influenced by the tariffs or “service plans” offered by firms. In our analysis we empirically estimate the drivers for cellular services how demographic and plan characteristics affect the user choices. We first provide a theoretical model and then provide insight into consumption patterns over a one year period of cellular voice and data services and relate it to service plan design.