Usage-Based Pricing and Demand for Residential Broadband

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in University of GeorgiaSeptember 2013 AbstractThe increasing use of the Internet creates a need to manage traffic while preserving equal treatment of content. We estimate demand for residential broadband, using high-frequency data from subscribers facing a three-part tariff, and use the estimates to study the welfare implications of usage-based pricing, a commonly offered solution to network congestion. The three-part tariff makes data usage during the billing cycle a dynamic problem; thus, generating variation in the (shadow) price of usage during the month. We provide evidence that subscribers respond to this variation, and use their dynamic decisions to estimate a flexible distribution of willingness to pay for different plan characteristics. Using these estimates, we show that usage-based pricing eliminates low-value traffic and improves overall welfare. Usage-based pricing might decrease consumer surplus, depending on what alternative is considered. Furthermore, we show that the costs associated with investment in fiber-optic networks (an alternative proposed to deal with congestion) are likely recoverable in some markets.

Tariff diversity and competition policy: drivers for broadband adoption in the European Union

“…Results are presented in Section 3, Section 4 concludes. 10 Note that the analysis does not directly test the effect of UBP versus flat-rate pricing, as nicely done in Nevo et al (2016) for broadband usage. We rather look at price dispersion at an aggregated level, accounting for different forms of second-degree and third-degree price discrimination.…”

Speed 2.0: Evaluating Access to Universal Digital Highways

“…Greenstein and McDevitt (2011) provide benchmark estimates of the economic value created by broadband Internet in the US. Some studies assess the demand for residential broadband: Goolsbee and Klenow (2006) use survey data on individuals' earnings and time spent on the Internet, while Nevo et al (2015) employ high-frequency broadband usage data from one ISP. To our knowledge, ours is the first study to estimate consumer surplus from Internet usage using property prices for a large economy.…”

Pricing strategies and competition in the mobile broadband market

“…They show that the prices were determined primarily by access regulations and service characteristics, including the technology used to provide the service and the bundling of the broadband service with other services such as television. Finally, Nevo et al (2016) employ high-frequency usage data from a group of around 55,000 subscribers in the US to estimate demand for a residential fixed broadband service. They use their model estimates to evaluate the welfare implications of usage-based pricing.…”