Title: 
''Handset Subsidies - An Empirical Investigation'' 1
Author: Pedro Pita Barros (Universidade Nova de Lisboa)
Date: August 2006
Summary: Mobile phone companies compete on several dimensions. One is price. Another one is equipment subsidization. Using hedonic regressions for implicit subsidies and for prices from the Portuguese market, at the handset level, we unveil stylized facts. They are used more intensively in new models and tend to vanish as the handset model ages. Larger networks tend to decrease its subsidies when network size grows, the smaller network decreases subsidies when its size decreases. The three existing operators do subsidize differently. In particular, the larger network subsidizes less than the others. The characteristics that appear associated with handset subsidies also differ across companies, suggesting they may be targeting distinct consumer groups. This is visible in characteristics associated with leisure features and services. Our results show that companies are heavily subsidizing handsets supporting the new 3G technology (and its associated services). Subsidies are clearly larger for 3G phones, and prices are aligned with handsets with the same characteristics but without 3G support. Both findings point to a strategy of subsidizing handsets in order to induce a takeoff of 3G services. The available evidence does not raise, for the moment, special regulatory concerns.
See:
Seminar programmehttps://www.anacom.pt/render.jsp?contentId=415630
Executive summary of the study 1 (Available in portuguese)
1 This study, including its presuppositions and conclusions, is the exclusive responsibility of its authors and does not necessarily represent or is in any way binding upon the position of ANACOM.
