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Asian Journal of Information and Communications 11(1)
Asian Journal of Information and Communications 11(1)

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Asian Journal of Information and Communications

An empirical study of pay TV competition with bundled services in Korea Yusun Hwang

  • Page:126-136
  • 2019-11-04

As the bundled services become widespread, the competition in pay TV, broadband, and mobile services markets is closely related to each other. When consumers subscribe to pay TV services, they also consider subscriptions of broadband and mobile services. Demand estimation for these services should be implemented with a careful consideration about the interdependence of the competition in these markets. This study examines pay TV competition with the consideration of the influence of bundling strategy. Specifically, I estimate the demand function of pay TV, broadband, and mobile services altogether by using nested logit model where the consumer’s choice set consists of the combinations of pay TV, broadband, mobile service, and bundling type. Then I quantify demand substitutability between pay TV services such as IPTV, satellite, and cable services by simulating price change of each service. Empirical results show very low demand substitutability between pay TV services, which should be interpreted as the interdependence of competition in pay TV and telecommunication services rather than evidence for defining the narrow market for each pay TV service. In other words, evaluating the competition of pay TV market should take into account the influence of competition of pay TV on other markets and vice versa.

Keywords: demand estimation, pay TV market, nested logit model, market definition

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