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An Overview of Telecommunications Demand Modeling

In the recent years, the telecommunications market structures have undergone significant upheavals. The telecommunications sector has also many characteristics, which distinguish it from the other sectors. The nature of the interdependencies and externalities that this sector possesses, makes the task of modeling for demand analysis very unique and complex. This paper presents a profile of the special characteristics of the telecommunications sector and presents an overview of the theoretical and empirical studies of demand analysis pertaining to this sector. The paper begins with a generic model of access demand, which was extensively used by the Bells system, including price, income, ‘market size’ and ‘habits’ as predictors. It then covers many later extensions of this model, which take account of the emerging new features of the telecommunication services sector. The paper also provides an overview of some of the empirical studies on the subject and raises many issues related to the conceptual aspects as also those of data that deserve further attention and analysis.