Innovative Effects of the Entrance of the IP Telephone on the Long-Distance Telephone Service Market in China

The effects of the IP telephone´s entrance into the long-distance telephone service market in China were analyzed empirically. It is the high speed expansion of the Internet users, as well as the relatively lower call fees, that has promoted the IP telephone´s blast into that market in recent years. The entrance of the IP telephone has changed the structure of the market into a triangular framework led by the IP telephone, followed by the wireline telephone and the mobile telephone, and hence notably optimized the market structure. The significantly positive cross-price elasticity of the IP telephone to the traditional long-distance telephone indicates a strong substitution effect of the IP telephone on the traditional long-distance telephone. The consumers´ welfare has been greatly enhanced by the IP telephone, which has remarkably improved the market´s efficiency. The IP telephone will have a wide market perspective bec.ause of the transformation of the consumption trends from the traditional form to the IP form, and because of the emergence of new network communication tools.