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Licensed Unlicensed Requires Authentication Published by De Gruyter May 8, 2014

How do Attributes of Broadband Plans Affect Price?

Scott J. Wallsten EMAIL logo and James Riso

Abstract

Broadband has become ubiquitous across OECD countries, yet because it is typically sold as part of a bundle of services, each with its own set of options, little research has explored how it is priced. In this paper we assemble a new dataset of more than 25,000 residential and business broadband plans from all OECD countries from 2007 to 2009 to explore how data metering, service contracts, and bundling voice, video, and data affect the prices consumers pay. We find that faster speeds are correlated with higher prices, although prices increase at a decreasing rate as speeds increase. Additionally, bundles including voice and video are more expensive than standalone service, and plans with more channels included in video bundles are more expensive than plans with fewer channels. Finally, the analysis shows tradeoffs consumers and suppliers make: plans with data caps are less expensive than those without caps and plans with contracts are less expensive than month-to-month plans.


Corresponding author: Scott J. Wallsten, Technology Policy Institute and Georgetown Center for Business and Public Policy, 1099 New York Ave., Suite 520, Washington, DC 20001, USA, e-mail:

Acknowledgments

Wallsten is vice president for research and senior fellow at the Technology Policy Institute. Riso was a research associate at TPI when we conducted this research and is now at Cornerstone Research. Any views expressed in this paper are those of the authors alone. We thank Corwin Rhyan for excellent research assistance and David Burstein, Shane Greenstein, Robert Hahn, Thomas Lenard, Gregory Rosston, Dennis Weisman, and two anonymous referees for helpful comments. The authors are responsible for any errors.

Appendix 1: Time Fixed Effects.

Residential Broadband PlansBusiness Broadband Plans
2007Q2–19.40–162.7
2007Q3–14.54–65.34
2007Q4–24.38**–258.2**
2008Q1–32.32**–377.5**
2008Q2–51.57**–138.0
2008Q3–53.22**–144.5
2008Q4–63.16**–215.4
2009Q1–65.17**–245.8**
2009Q2–63.93**–96.32
2009Q3–67.35**–140.9
2009Q4–63.51**–201.6

Fixed effects are shown relatively to 2007Q1, which is the excluded quarter.

**significant at 1%.

Published Online: 2014-5-8
Published in Print: 2014-3-1

©2014 by De Gruyter

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