Document(s): 

estimating_demand_for_fixed-mobile_bundles_and_switching_costs_between_tariffs.pdf

Author(s): 

Lukasz Grzybowski; Julienne Liang

Year of publication: 

2013

This paper estimates demand for fixed-mobile bundles (quadruple play tariffs) using a
database of subscribers to a single mobile operator from a single town in a European country
which has full coverage with both ADSL and FTTH broadband technologies. Based on the
demand estimation we find that consumer valuation of FTTH broadband in 2013 increased
over time while ADSL lost on attractiveness relative to FTTH but also in absolute terms,
which suggests that consumers increasingly care about the speed of connection offered by
FTTH. The consumer surplus increased substantially due to ongoing transition of consumers
from less valued quadruple play tariffs with ADSL to more valued with FTTH. We also find
that for quadruple play subscribers mobile data is complementary to fixed broadband access,
which suggests that these consumers use Internet access via mobile data to sample online
content but they complete their online activity using fixed Internet access at home. On
the other hand, mobile voice usage is a substitute to fixed broadband access and consumers
reduce their voice consumption once they get broadband connection. We also find that
there are substantial switching costs between tariffs, which other things being equal, greatly
decrease consumer surplus.