Économie et Statistique n° 362 Measuring the Growth in Mobile Telphone Service Prices - Employment Survey

Economie et Statistique
Paru le : 01/07/2003
Consulter

Measuring the Growth in Mobile Telephone Service Prices: a Difficult Task

François Magnien

The boom in new information and communication technologies(NICTs) has triggered intense debate on the evaluation of growth and more specifically on international growth measurement comparability. Huge price cuts are supposedly being made in NICTs, but they are hard to measure. Mobile telephone services, which appeared much more recently than computers and have enjoyed a spectacu-lar boom, pose a particular problem in this regard. Whereas computers are sophisticated products sold for a single price, mobile telephone service pricing is extremely complex since it is mainly made up simply of call minutes,. The «hedonic» methods frequently used to measure computer price growth are therefore hard to use in this case. The ongoing price changes call rather for a constant-utility index. This type of index measures the month-on-month growth in minimal expenditure to satisfy the specific uses broken down by consumer profiles. Alternatives to this approach are also put forward to incorporate how long it takes consumers to adjust to choose the best products (indexes «with frictions»). An INSEE survey of three French mobile telephone operators is used to estimate the distributions of monthly call durations and numbers for the different consumer profiles. These distributions are required to properly take into account the many threshold effects found in mobile telephone service pricing when prices change or new products appear. The index without frictions, introduced into the consumer price index in January 2003, shows the end of the mobile telephone service price cuts in the last quarter of 1999 following the sharp cuts characteristic of the new products. This change was partly due to the investments made by operators to develop their GSM networks and the prospect of deploying third generation mobile networks (UMTS). The findings of the approach with frictions are highly dependent on the hypothesis made regarding the time taken by consumers to choose the cheapest...

Economie et Statistique
No 362
Paru le : 01/07/2003