An Estimation of UK Telephone Access Demand Using Pseudo-Panel Data

The policy of rebalancing tariffs in the newly liberalised telecommunications market has given rise to concerns about universal service issues. The rise of connection and rental charges threatens to increase the number of disconnections and burden low-income groups in a disproportionate manner. In order to assess the validity of these fears, we estimate a telephone access demand model based on UK houshold data. We use a pseudo-panel technique to account for the repeated cross-section nature of the data. Our reseulats of small, but significant price elasticities with respect to connection charges, line rental, and household income are consistent with evidence from North America. Furthermore, we find a significant differential in the elasticity measured between high- and low-income groups.