Forecasting telecommunications service subscribers in substitutive and competitive environments

The telecommunications market is expanding rapidly and becoming more substitutive and competitive. In this environment, demand forecasting is very difficult, yet important for both practitioners and researchers. In this paper, the modeling approach proposed by Jun and Park (1999) is adopted. The basic premise is that demand patterns result from choice behavior, where customers choose a product to maximize their utility. A choice-based substitutive diffusion model is applied to the South Korean mobile telecommunications service market where digital service has completely replaced analog service. A choice-based competitive diffusion model is also formulated and applied to the case where two digital services compete. In comparison with Bass-type models, these two models provide superior fitting and forecasting performance. Finally, a new choice-based diffusion model is suggested to describe an environment in which substitution and competition occur simultaneously and the application results are shown.