DOI:

Abstract

Voice Over Internet Protocol (VOIP) providers is generating the game of telecommunication market. Based on the available advanced technologies and smart soft-wares, new entrants can reduce initial investment and production costs to compete with incumbent local exchange carriers (ILECs), which dominate the telecommunication market for a long time due to economy of scale and scope. This paper introduces an economic model to explain the relationship between traditional telephony services and VOIP services. In particular, we show that (1) low income families have not benefited from VOIP services; and (2) VOIP could be a substitute for long-distance calls but complementary to local services. Specifically, we implement an empirical analysis of bundling telecommunications services that are carried out with pooled cross sectional time-series data for all states of the United States of America in the period 1995-2006. Finally, we offer a brief overview on current situation of VOIP services in Vietnam.

Keywords

Competition; Complement; Substitution; Telecom; VOIP.