Broadband Prices Research Articles

The profitability of flat-price broadband with an over-the-top subscription content product – benefits from cooperation

We investigate the effect on the broadband market when an over-the-top subscription content product is introduced. Does it necessarily increase or decrease profitability of the broadband product when it (a) boosts the utility of broadband but (b) imposes additional costs to deliver the broadband service? The short answer is it depends. The different scenarios that we choose to illustrate this demonstrate that in many cases, the broadband and content providers can jointly benefit from coordination on how the content product is priced. Empirical evidence confirms that coordination does take place where 'network neutrality' is not mandated. In addition to the illustrative scenarios, we run a large number of simulations with a single broadband and single content provider, restricting the firms to integer prices, for different distributions of the customer valuations. The results show that cooperation between the firms (possibly through paid peering) generally produces better outcomes (also from the consumer point of view) than when the broadband provider reacts by raising the price of broadband independently.

The correlation between broadband prices and the digital divide: A survey of Taiwan’s north coast

This study highlights the importance of differentiating between urban and rural areas when exploring broadband issues that matter to consumers and statistically sampling accordingly. To test the effectiveness of rural broadband programmes in improving internet usage, this study is based on a selection of five geographically adjacent administrative districts with varying population densities.During a survey using the double-bounded dichotomous choice model to measure people’s WTP, two research hypotheses were tested and verified through regression analysis. The results showed that consumers living in rural areas are significantly less willing to pay for broadband than those living in urban areas, which contradicts the findings of the study by Worden and Hambly (2022) conducted in Canada.Additionally, the significant t value test results found in this study showed that consumers are willing to pay more for download bandwidth than for upload bandwidth for every dollar spent. This result indicates that consumers have a clear preference for one over the other and highlights significant differences in their choices.In particular, the results of the willingness-to-pay survey revealed that the incumbent operator yield opposite results in the regression coefficients for their willingness to pay for each unit of download bandwidth and upload bandwidth. This result may be due to differences in the design of internet products offered by the two operators.Given the inevitable reality that income generated by service operators in rural areas is lower than that in urban areas, there is a need to study price differentials between urban and rural areas in order to promote greater use of broadband internet in rural areas in the context of the adoption of a single price throughout the region.

High and Low: Residential Broadband Pricing and Quality Innovation in U.S. Urban Areas during the COVID-19 Pandemic

High and Low: Residential Broadband Pricing and Quality Innovation in U.S. Urban Areas during the COVID-19 Pandemic

A two-sided model of paid peering

Internet users have suffered collateral damage in tussles over paid peering between large ISPs and large content providers. Paid peering is a relationship where two networks exchange traffic with payment, which provides direct access to each other’s customers without having to pay a third party to carry that traffic for them. The issue will arise again when the United States Federal Communications Commission (FCC) considers a new net neutrality order.We first consider the effect of paid peering on broadband prices. We adopt a two-sided market model in which an ISP maximizes profit by setting broadband prices and a paid peering price. We analytically derive the profit-maximizing prices, and show that they satisfy a generalization of the well-known Lerner rule. Our result shows that paid peering fees reduce the premium plan price, increase the video streaming price and the total price for premium tier customers who subscribe to video streaming services; however, the ISP passes on to its customers only a portion of the revenue from paid peering. ISP profit increases but video streaming profit decreases as an ISP moves from settlement-free peering to paid peering price.We next consider the effect of paid peering on consumer surplus. We find that consumer surplus is a uni-modal function of the paid peering fee. The paid peering fee that maximizes consumer surplus depends on elasticities of demand for broadband and for video streaming. However, consumer surplus is maximized when paid peering fees are significantly lower than those that maximize ISP profit. However, it does not follow that settlement-free peering is always the policy that maximizes consumer surplus. The peering price depends critically on the incremental ISP cost per video streaming subscriber; at different costs, it can be negative, zero, or positive.

The Role of Broadband Price Index in Fostering Economic Growth and Digitization in Europe

This study analyzes the determinants of the "Broadband Price Index" in Europe. The data used refers to 28 European countries between 2016 and 2021. The database used is the Digital, Economy, and Society Index-DESI of the European Commission. The data were analyzed using the following econometric techniques, namely Panel Data with Random Effects, Panel Data with Fixed Effects, Pooled OLS, WLS and Dynamic Panel. The value of the "Broadband Price Index" is positively associated with the DESI Index and "Connectivity", while it is negatively associated with "Fixed Broadband Take Up", "Fixed Broadband Coverage", "Mobile Broadband", "e-Government", "Advanced Skills and Development", "Integration of Digital Technology", "At Least Basic Digital Skills", "Above Basic Digital Skills", and "At Least Basic Software Skills". A cluster analysis was carried out below using the k-Means algorithm optimized with the Silhouette coefficient. The analysis revealed the existence of three clusters. Finally, an analysis of the machine learning algorithms was carried out to predict the future value of the "Broadband Price Index". The result shows that the most useful algorithm for prediction is the Artificial Neural Network-ANN, with an estimated value equal to an amount of 9.21%. Doi: 10.28991/HEF-2022-03-01-03 Full Text: PDF

Spectrum Flexibility and Mobile Development

In this paper we study the effects on mobile market outcomes from three specific attributes linked to a flexible spectrum policy: the presence of a secondary market for spectrum trading, a technological neutrality approach, and the possibility of conducting sharing agreements among operators. In terms of market outcomes, we identify four possible variables: capital investment, network coverage, service pricing, and adoption. After designing a precise causal approach linking the above-mentioned variables, we were able to identify a significant impact on the four independent variables from the spectrum policies. When those three policies are jointly adopted, mobile capital investment is 35.9% larger than when that is not the case. In addition, promoting these policies can increase network coverage by 9.8% after two years, bring down mobile broadband prices by -5.8%, and increase mobile broadband unique subscribers’ penetration by 0.9%. When we consider a wider period of 5-years, dynamic effects take over, resulting in mobile broadband prices being reduced in -14.3% and mobile broadband unique subscribers’ penetration potentially increasing in 2.4%. These results were verified to be robust after the addition of control variables and when controlling for potential endogeneities associated to these causal frameworks. In sum, we believe, based on this evidence, that a flexible approach towards spectrum management that allows for secondary trading, technological neutrality and network sharing can contribute significantly to the development of the mobile sector, thereby maximizing socioeconomic welfare.

Wired and Hired: Employment Effects of Subsidized Broadband Internet for Low-Income Americans

I present evidence on the relationship between broadband pricing and labor market outcomes for low-income individuals. Specifically, I estimate the effects of a Comcast service providing discounted broadband to qualifying low-income families. I use a triple differences strategy exploiting geographic variation in Comcast coverage, individual variation in eligibility, and temporal variation pre- and postlaunch. Local program availability increased employment rates and earnings of eligible individuals, driven by greater labor force participation and decreased probability of unemployment. Internet use increased substantially where the program was available. (JEL I32, J22, J31, L82, L86)

The Effect of Paid Peering Fees on Broadband Prices and Consumer Surplus

The Effect of Paid Peering Fees on Broadband Prices and Consumer Surplus

Wired and Hired: Employment Effects of Subsidized Broadband Internet for Low-Income Americans

We present evidence on the relationship between broadband pricing and labor market outcomes for low-income individuals. Specifically, we estimate the effects of a Comcast service providing discounted broadband to qualifying low-income families. We use a triple differences strategy exploiting geographic variation in Comcast coverage, individual variation in eligibility, and temporal variation pre- and post-launch. Program enrollment increases the probability that an eligible low-income individual is employed by 4.4 percentage points (7.8%), driven by greater labor force participation and decreased probability of unemployment. Internet use increased substantially where the program was available, narrowing the income-broadband gap by at least 40 percent.

Economics at the FCC, 2017–2018: Internet Freedom, International Broadband Pricing Comparisons, and a New Office of Economics and Analytics

The Federal Communications Commission’s (FCC’s) current strategic plan lists four priority goals: closing the digital divide; promoting innovation; protecting consumers and public safety; and reforming the FCC’s processes. Economists at the FCC contribute toward the realization of each of these goals, through analysis of the nature and significance of the underlying problems that regulations are intended to solve, as well as assessments of alternative solutions. Three major FCC initiatives demonstrate the role that economic analysis played in Commission decisions in 2017–2018: the Restoring Internet Freedom Order; the new hedonic pricing model that was used in the International Broadband Data Report; and the order that reorganized Commission economists into the Office of Economics and Analytics.

Australian Broadband Regulation Reviewed

This article establishes the relationship between the condition of Australian broadband services and Australia’s history of broadband regulation. It briefly surveys the history of the industry in terms of government action and firms’ responses. It reviews research on the effects of regulation and industry concentration internationally, which indicates that the effects of widely deployed policies are often small or undetectable. The article uses these findings to build models of national broadband prices, penetration and quality. The models are verified using recent statistics from developed economies, confirming that outcomes are little affected by access regulation, and also not by market concentration. Penetration and quality are strongly affected by technology factors. The models and the regulatory history are used to explain the condition of Australian broadband services, and to extract lessons applicable to future policy development.

Australian Broadband Regulation Reviewed

This article establishes the relationship between the condition of Australian broadband services and Australia’s history of broadband regulation. It briefly surveys the history of the industry in terms of government action and firms’ responses. It reviews research on the effects of regulation and industry concentration internationally, which indicates that the effects of widely deployed policies are often small or undetectable. The article uses these findings to build models of national broadband prices, penetration and quality. The models are verified using recent statistics from developed economies, confirming that outcomes are little affected by access regulation, and also not by market concentration. Penetration and quality are strongly affected by technology factors. The models and the regulatory history are used to explain the condition of Australian broadband services, and to extract lessons applicable to future policy development.

Evaluating consumer perception and willingness to pay for broadband in Nigeria

The study analysed the consumers’ perception, and willingness to pay for improvements in broadband qualities and attributes in Nigeria, using survey data collected in 2014 from 3300 respondent purposively sampled from eleven states in the country. The results show that 79%, of the respondents, still perceive broadband in Nigerian as expensive relative to its quality, which 58% and 84% of them conceive as slow and unreliable respectively. The respondents are, however, even willing to increase their payment for broadband if the qualities and attributes increase with an upper price limit of ₦10,000 per month. On average, consumers are currently willing to pay an extra 166% per month for an improvement from slow to fast broadband, 96% for an improvement from fast to high-speed broadband, 90% for the inclusion of Videophone and 36.2% for the addition of priority. These, in other words, indicate that their current perception of the price of broadband as expensive is not absolute, but relative to the existing broadband qualities, which inform the utility they derive from its usage. There is, therefore, need for improvements in the qualities and attributes of broadband in the country to boost its subscription.

MARKETING MIX, CUSTOMER SATISFACTION AND LOYALTY: AN EMPIRICAL STUDY OF TELECOM SECTOR IN BHUTAN

MARKETING MIX, CUSTOMER SATISFACTION AND LOYALTY: AN EMPIRICAL STUDY OF TELECOM SECTOR IN BHUTAN

Broadband Adoption: Translating the Digital Divide Literature into Effective Government Policies and Actions

Broadband Adoption: Translating the Digital Divide Literature into Effective Government Policies and Actions

What Influences International Differences in Broadband Prices?

Broadband prices differ significantly throughout the world, however discussion of why receives little attention in the academic and policy literature. Focussing on landline broadband, this exploratory article helps fill a knowledge gap by discussing some methodologies for comparing broadband prices between countries, and suggesting five factors that influence broadband prices: demand, supply, average price level, regulation, and physical/infrastructural factors. In this discussion, we also examine where Australia sits in relation to global broadband prices.

What Influences International Differences in Broadband Prices?

Broadband prices differ significantly throughout the world, however discussion of why receives little attention in the academic and policy literature. Focussing on landline broadband, this exploratory article helps fill a knowledge gap by discussing some methodologies for comparing broadband prices between countries, and suggesting five factors that influence broadband prices: demand, supply, average price level, regulation, and physical/infrastructural factors. In this discussion, we also examine where Australia sits in relation to global broadband prices.

Broadband penetration and economic growth: Do policies matter?

Although a significant body of literature has examined the interlinkage between broadband penetration and economic growth, the linkage between broadband policies and broadband penetration has been less studied in the literature. In addition, the role of 3G/4G services has also received limited attention. To address this issue, we combine the staggered timing of the implementation of broadband and 3G/4G services across countries and examine its impact on broadband penetration. Relatedly, we also examine the impact of broadband penetration on economic growth and the possible growth drivers. We find that while broadband policies improve fixed broadband penetration, 3G/4G services improve mobile broadband penetration; the magnitude of the latter being nearly three-times that of the former. Besides, we also uncover a positive effect of broadband penetration on economic growth, primarily working through a reduction in broadband prices and well as greater innovation and entrepreneurial activity.

The price of broadband quality: tracking the changing valuation of service characteristics

ABSTRACTThis paper investigates how retail broadband prices, choice and quality are changing over time. Using a data set containing daily observations of plans offered in Ireland from 2007 to 2013, this paper applies hedonic modelling techniques to observe the changing pricing of service characteristics. Although we find that average nominal prices remain static throughout our sample period, quality of service has risen dramatically over time, particularly with respect to download speed. Some characteristics of broadband plans exhibit broadly stable valuations over time, but the elasticity of price with respect to advertised download speed and the premium on bundled services declined for most types of broadband plans during the sample period. In addition, the retail price premium enjoyed by the incumbent operator fell significantly since 2007.

An economic model for a new broadband ecosystem based on fast and slow lanes

Today’s residential broadband ecosystem is in stasis: ISPs suffer from low margins and flat revenues, content service providers (CSPs) have unclear incentives to invest in broadband infrastructure, and users have limited dimensions (speed/quota) in which to compare broadband pricing. This article explores the use of service quality capabilities, in the form of fast and slow lanes, for overcoming this stasis. We propose an architecture in which all entities have a say: CSPs request dynamic fast and slow lane creation for specific sessions, ISPs operate and charge for these lanes, and users control their broadband bandwidth available to such lanes. We develop an economic model that balances fast and slow lane pricing by the ISP with the returns for CSPs and service quality improvement for end users, and evaluate the parameters of our model with real traffic traces. We believe our proposal based on dynamic fast and slow lanes can represent a win-win-win situation for ISPs, CSPs, and end users alike, and has the potential to overcome the current stagnation in broadband infrastructure investment.