Are main lines and mobile phones substitutes or complements? Evidence from Africa

Many developed and developing countries have approached telecommunications reform by opening the market for mobile telephones to private participation and competition. One result of this strategy is the astounding worldwide growth in mobile communications, with developing countries accounting for the fastest growth. It is believed that mobile phones are complementary to fixed-line telephony in developed countries, but they appear to be substitutes for main lines in developing regions where access is low or non-existent. This paper examines the relationship between mobile and main-line telephones by accounting for reverse causality between them in an environment with low levels of development. The results suggest that mobile telephones act as a competitive force encouraging fixed-line providers to improve access. It is possible that mobile and main lines are sometimes substitutes, and at other times complements in consumption, even where fixed-line access is low.