1We are grateful to TNS Telecoms for generously sharing the ReQuest and Bill Harvesting data and providing technical assistance. Usage Substitution between Fixed and Mobile Telephony in the U.S.

ABSTRACT: We empirically estimate the substitution of fixed and mobile services for voice telephony using a large, U.S. household survey conducted over the period 1999-2001. Detailed information on household calling allow us to estimate the effective marginal price for fixed and mobile service segmented by intraLATA, interLATA intrastate and interstate. Predicted prices are estimated using instrumental variables methods. Then, using the Linear Approximate/ Almost Ideal Demand System (LA/AIDS) to model demand for a call, we find significant positive cross-price elasticities between fixed and mobile usage. Because mobile usage prices fell dramatically over this period, we estimate that fixed usage may have been about 50 % higher had mobile prices not fallen