FMS patterns: Penetration vs. traffic substitution in different groups of countries

This paper studies the issue of fixed to mobile substitution, or FMS, which in recent years has become a significant trend. FMS occurs in two ways: one is the effect of a shift of traffic from fixed line to mobile; the other is the effect on fixed line penetration of the growth of mobile subscriptions. These two effects are called traffic substitution and penetration substitution, respectively. This paper, based on data from 1997 through 2004, finds that different substitution effects are taking place in different economies. In the more developed countries (G7 and NIE) FMS models mainly focus on ‘traffic substitution’. However, in the emerging economies (ASEAN and BRIC) FMS patterns mainly focus on ‘penetration substitution’ in association with the income effect. Policy implications on information economics are drawn from the above phenomena.